April 23, 2015
Intellectual Property Rights (IPR) and International Trade
Background

What is the extent of IPR infringement? IPR
infringement is difficult to quantify, given its illicit nature,
What is intellectual property (IP), and how is it
although some estimates of trade in counterfeit and pirated
protected? IP is a creation of the mind embodied in
goods are in the hundreds of billions of dollars per year
physical and digital objects. Intellectual property rights
worldwide. Innovation can be expensive and time-
(IPR) are legal, private, enforceable rights that governments
consuming, but IPR infringement often occurs with
grant to inventors and artists. IPR generally provide time-
relatively low risk and potentially high profit. The digital
limited monopolies to right holders to use, commercialize,
environment heightens such challenges. For example, in a
and market their creations and to prevent others from doing
2012 International Trade Commission survey,
the same without their permission (acts referred to as
approximately 10% of digitally intensive U.S. firms
infringements). IPR are intended to encourage innovation
reported experiencing at least one “cyber incident” harming
and creative output. After these rights expire, other
their network data systems’ confidentiality, integrity, or
inventors, artists, and society at large can build on them.
availability. In FY2014, U.S. Customs and Border
Protection reported seizing $1.2 billion of IPR-infringing
Examples of IPR
goods at U.S. borders, with China as the largest source.
Patents protect new innovations and inventions, such as
pharmaceutical products, chemical processes, new business
Trade Policy Tools for IPR
technologies, and computer software.
Copyrights protect artistic and literary works, such as books,
How are IPR and international trade related? An
music, and movies.
increasing amount of goods and services traded are IPR-
related. Developed countries traditionally have been the
Trademarks protect distinctive commercial names, marks, and
source of IP (see Figure 1), but emerging markets also are
symbols.
becoming centers of innovation. The use of trade policy as
Trade secrets protect confidential business information that is
a framework for advancing IPR internationally emerged
commercially valuable because it is secret, including formulas,
with the North American Free Trade Agreement (NAFTA)
manufacturing techniques, and customer lists.
and World Trade Organization (WTO) 1995 Agreement on
Geographical indications (GI) protect distinctive products
Trade-Related Aspects of Intellectual Property Rights
from a certain region, applying primarily to agricultural products.
(TRIPS Agreement). These agreements build on IPR
treaties, dating to the 1800s, administered by the World
Intellectual Property Organization (WIPO).
What is the congressional interest? The congressional
role in IPR and international trade stems from the U.S.
Constitution. Congress has legislative, oversight, and
“To promote the Progress of Science and useful Arts,
appropriations responsibilities in addressing IPR and trade
by securing for limited Times to Authors and
policy. Since 1988, Congress has included IPR as a
Inventors the exclusive Right to their respective
principal negotiating objective in trade promotion authority
Writings and Discoveries” and “To regulate
(TPA). The context for congressional interest may include
Commerce with foreign Nations” - U.S. Constitution,
policy concerns such as: the role of IPR in the U.S.
Article 1, Section 8, stipulating powers of Congress
economy; the impact of IPR infringement on U.S.
commercial, health, safety, and security interests; and the
balance between protecting IPR to stimulate innovation and
What is the WTO TRIPS Agreement? The TRIPS
advancing other public policy goals.
Agreement sets minimum standards of protection and
enforcement for IPR. It includes WTO non-discrimination
What is IP’s role in the U.S. economy? IP is considered
principles and subjects IPR disputes to WTO’s binding
important to U.S. economic growth and comparative
dispute settlement mechanism. It seeks a balance of rights
advantage internationally. A range of U.S. industries rely
and obligations between protecting private right holders and
on IPR protection. According to the Department of
securing broader public benefits. It includes flexibilities for
Commerce, in 2010, a subset of the most IP-intensive
developing countries in implementation and for
industries were estimated to accounted for nearly one-fifth
pharmaceutical patent obligations. The 2001 WTO “Doha
of U.S. direct employment and two-thirds of U.S.
Declaration” committed members to interpret TRIPS to
merchandise exports, and in 2007, nearly one-fifth of U.S.
support public health and access to medicines.
private services exports. At the same time, lawful
limitations to IPR, such as “fair use” exceptions in

copyright law for media, research, and teaching, also may
have economic benefits.
www.crs.gov | 7-5700




Intellectual Property Rights (IPR) and International Trade
Figure 1. Exports (Receipts) of Royalties and License
• Under U.S. trade preference programs, such as the
Fees for Top Countries, 2013 (billion $)
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 duty-
free entry to certain products from the country.
Issues for Congress
Why are IPR and trade issues actively debated? U.S.
trade policy promotes IPR. Yet, IPR and trade issues
involve a range of stakeholder interests. Some view IPR as
beneficial to countries of all economic levels, while others
view stringent IPR policies as an obstacle to economic
growth in less advanced countries. IPR in trade negotiations
can raise complex issues. For example, patents provide
Source: World Trade Organization, 2014.
incentives for medical innovations, but raise questions
about effects on goals to provide affordable access to
What are IPR issues in U.S. FTA negotiations? Since the
medicines. As digital trade grows, copyright issues intersect
advent of TRIPS in 1995, U.S. trade negotiating objectives
with debates about ISP liability, cross-border data flows,
are to ensure that U.S. FTAs “reflect a standard of
data privacy, and cybertheft of trade secrets.
protection similar to that found in U.S. law” (“TRIPS-plus”
standards), and to apply existing IPR protection to digital
What are possible U.S. IPR trade negotiating
media through adherence to the WIPO “Internet Treaties.”
objectives? Bicameral legislation to renew TPA, the
The United States has 14 FTAs with 20 countries. In the
Bipartisan Congressional Trade Priorities and
ongoing Trans-Pacific Partnership (TPP) and Transatlantic
Accountability Act of 2015, has been introduced in the
Trade and Investment Partnership (T-TIP) negotiations, the
114th Congress (H.R. 1890/S. 995). In addition to largely
United States generally has followed the 2002 TPA (P.L.
incorporating the IPR objectives from the 2002 TPA, the
107-210) IPR objectives, although the law expired in 2007.
proposed legislation includes new objectives on addressing
cybertheft and protecting trade secrets and proprietary
Key IPR issues in the TPP and T-TIP negotiations include:
information. It also includes the objective of ensuring that
agreements negotiated “foster innovation and access to
• copyright enforcement, including liability for Internet
medicines.” At the same time, it does not specifically
Service Providers (ISP) and criminal penalties;
include the pharmaceutical provisions of the so-called May
• pharmaceutical patents and implications for access to
10, 2007 Understanding, which modified, in part, some
medicines, including flexibilities for developing
patent provisions to further promote access to medicines in
countries (e.g., optional patent term extensions);
then-pending U.S. FTAs with Peru, Panama, and Colombia.
• data exclusivity for pharmaceuticals and biologics
How effectively are IPR commitments enforced? The
(restrictions on using test data given for market
extent to which U.S. FTA partners and WTO members are
approval);
upholding their IPR commitments is of interest. Are U.S.
• digital trade issues, including copyright enforcement,
trade policy tools such as “Special 301,” bilateral
cross-border data flows, and “forced” localization
consultations, or WTO/FTA dispute settlement effective in
barriers to trade;
bringing countries into IPR compliance? Are Special 301
designations balanced in assessing countries’ IPR regimes?
• trade secret protection to combat cybertheft; and
• treatment of GIs, and their effect on market access.
How should the United States address IPR issues with
emerging economies?
Emerging economies such as China,
These proposed FTAs could be used to develop common
India, and Brazil present significant IPR concerns, but are
IPR approaches for addressing issues of mutual interest
not a part of current U.S. FTA negotiations. To advance
related to countries not party to these FTAs, as well as
IPR goals, the United States could encourage these
through the WTO.
countries to join current FTA negotiations; engage them in
multilateral negotiations to revise the TRIPS Agreement;
What are other trade policy tools to support IPR?
use trade policy tools to further encourage IPR policy
reform, including through bilateral investment treaty
• The “Special 301” report, by the Office of the U.S.
negotiations; and seek greater trade enforcement action
Trade Representative pursuant to the Trade Act of 1974
through the WTO. See CRS Report RL34292, Intellectual
as amended, identifies countries with inadequate IPR
Property Rights and International Trade.
regimes on “watch lists.” Trade secret theft, including
through cybercrime, is a growing focus.
Shayerah Ilias Akhtar, siliasakhtar@crs.loc.gov, 7-9253
• Section 337 of the amended Tariff Act of 1930
Ian F. Fergusson, ifergusson@crs.loc.gov, 7-4997
authorizes the International Trade Commission (ITC) to

prohibit U.S. imports that infringe on U.S. IPR. Section
IF10033
337 cases have been largely patent-focused.
www.crs.gov | 7-5700