April 23, 2015
Intellectual Property Rights (IPR) and International Trade
What is intellectual property (IP), and how is it
protected? IP is a creation of the mind embodied in
physical and digital objects. Intellectual property rights
(IPR) are legal, private, enforceable rights that governments
grant to inventors and artists. IPR generally provide timelimited monopolies to right holders to use, commercialize,
and market their creations and to prevent others from doing
the same without their permission (acts referred to as
infringements). IPR are intended to encourage innovation
and creative output. After these rights expire, other
inventors, artists, and society at large can build on them.
Examples of IPR
Patents protect new innovations and inventions, such as
pharmaceutical products, chemical processes, new business
technologies, and computer software.
Copyrights protect artistic and literary works, such as books,
music, and movies.
Trademarks protect distinctive commercial names, marks, and
Trade secrets protect confidential business information that is
commercially valuable because it is secret, including formulas,
manufacturing techniques, and customer lists.
Geographical indications (GI) protect distinctive products
from a certain region, applying primarily to agricultural products.
What is the congressional interest? The congressional
role in IPR and international trade stems from the U.S.
Constitution. Congress has legislative, oversight, and
appropriations responsibilities in addressing IPR and trade
policy. Since 1988, Congress has included IPR as a
principal negotiating objective in trade promotion authority
(TPA). The context for congressional interest may include
policy concerns such as: the role of IPR in the U.S.
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
advancing other public policy goals.
What is IP’s role in the U.S. economy? IP is considered
important to U.S. economic growth and comparative
advantage internationally. A range of U.S. industries rely
on IPR protection. According to the Department of
Commerce, in 2010, a subset of the most IP-intensive
industries were estimated to accounted for nearly one-fifth
of U.S. direct employment and two-thirds of U.S.
merchandise exports, and in 2007, nearly one-fifth of U.S.
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.
What is the extent of IPR infringement? IPR
infringement is difficult to quantify, given its illicit nature,
although some estimates of trade in counterfeit and pirated
goods are in the hundreds of billions of dollars per year
worldwide. Innovation can be expensive and timeconsuming, but IPR infringement often occurs with
relatively low risk and potentially high profit. The digital
environment heightens such challenges. For example, in a
2012 International Trade Commission survey,
approximately 10% of digitally intensive U.S. firms
reported experiencing at least one “cyber incident” harming
their network data systems’ confidentiality, integrity, or
availability. In FY2014, U.S. Customs and Border
Protection reported seizing $1.2 billion of IPR-infringing
goods at U.S. borders, with China as the largest source.
Trade Policy Tools for IPR
How are IPR and international trade related? An
increasing amount of goods and services traded are IPRrelated. Developed countries traditionally have been the
source of IP (see Figure 1), but emerging markets also are
becoming centers of innovation. The use of trade policy as
a framework for advancing IPR internationally emerged
with the North American Free Trade Agreement (NAFTA)
and World Trade Organization (WTO) 1995 Agreement on
Trade-Related Aspects of Intellectual Property Rights
(TRIPS Agreement). These agreements build on IPR
treaties, dating to the 1800s, administered by the World
Intellectual Property Organization (WIPO).
“To promote the Progress of Science and useful Arts,
by securing for limited Times to Authors and
Inventors the exclusive Right to their respective
Writings and Discoveries” and “To regulate
Commerce with foreign Nations” - U.S. Constitution,
Article 1, Section 8, stipulating powers of Congress
What is the WTO TRIPS Agreement? The TRIPS
Agreement sets minimum standards of protection and
enforcement for IPR. It includes WTO non-discrimination
principles and subjects IPR disputes to WTO’s binding
dispute settlement mechanism. It seeks a balance of rights
and obligations between protecting private right holders and
securing broader public benefits. It includes flexibilities for
developing countries in implementation and for
pharmaceutical patent obligations. The 2001 WTO “Doha
Declaration” committed members to interpret TRIPS to
support public health and access to medicines.
www.crs.gov | 7-5700
Intellectual Property Rights (IPR) and International Trade
Figure 1. Exports (Receipts) of Royalties and License
Fees for Top Countries, 2013 (billion $)
• Under U.S. trade preference programs, such as 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 dutyfree entry to certain products from the country.
Issues for Congress
Source: World Trade Organization, 2014.
What are IPR issues in U.S. FTA negotiations? Since the
advent of TRIPS in 1995, U.S. trade negotiating objectives
are to ensure that U.S. FTAs “reflect a standard of
protection similar to that found in U.S. law” (“TRIPS-plus”
standards), and to apply existing IPR protection to digital
media through adherence to the WIPO “Internet Treaties.”
The United States has 14 FTAs with 20 countries. In the
ongoing Trans-Pacific Partnership (TPP) and Transatlantic
Trade and Investment Partnership (T-TIP) negotiations, the
United States generally has followed the 2002 TPA (P.L.
107-210) IPR objectives, although the law expired in 2007.
Key IPR issues in the TPP and T-TIP negotiations include:
• copyright enforcement, including liability for Internet
Service Providers (ISP) and criminal penalties;
• pharmaceutical patents and implications for access to
medicines, including flexibilities for developing
countries (e.g., optional patent term extensions);
• data exclusivity for pharmaceuticals and biologics
(restrictions on using test data given for market
• digital trade issues, including copyright enforcement,
cross-border data flows, and “forced” localization
barriers to trade;
• trade secret protection to combat cybertheft; and
• treatment of GIs, and their effect on market access.
These proposed FTAs could be used to develop common
IPR approaches for addressing issues of mutual interest
related to countries not party to these FTAs, as well as
through the WTO.
What are other trade policy tools to support IPR?
• The “Special 301” report, by the Office of the U.S.
Trade Representative pursuant to the Trade Act of 1974
as amended, identifies countries with inadequate IPR
regimes on “watch lists.” Trade secret theft, including
through cybercrime, is a growing focus.
• Section 337 of the amended Tariff Act of 1930
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
incentives for medical innovations, but raise questions
about effects on goals to provide affordable access to
medicines. As digital trade grows, copyright issues intersect
with debates about ISP liability, cross-border data flows,
data privacy, and cybertheft of trade secrets.
What are possible U.S. IPR trade negotiating
objectives? Bicameral legislation to renew TPA, the
Bipartisan Congressional Trade Priorities and
Accountability Act of 2015, has been introduced in the
114th Congress (H.R. 1890/S. 995). In addition to largely
incorporating the IPR objectives from the 2002 TPA, the
proposed legislation includes new objectives on addressing
cybertheft and protecting trade secrets and proprietary
information. It also includes the objective of ensuring that
agreements negotiated “foster innovation and access to
medicines.” At the same time, it does not specifically
include the pharmaceutical provisions of the so-called May
10, 2007 Understanding, which modified, in part, some
patent provisions to further promote access to medicines in
then-pending U.S. FTAs with Peru, Panama, and Colombia.
How effectively are IPR commitments enforced? The
extent to which U.S. FTA partners and WTO members are
upholding their IPR commitments is of interest. Are U.S.
trade policy tools such as “Special 301,” bilateral
consultations, or WTO/FTA dispute settlement effective in
bringing countries into IPR compliance? Are Special 301
designations balanced in assessing countries’ IPR regimes?
How should the United States address IPR issues with
emerging economies? Emerging economies such as China,
India, and Brazil present significant IPR concerns, but are
not a part of current U.S. FTA negotiations. To advance
IPR goals, the United States could encourage these
countries to join current FTA negotiations; engage them in
multilateral negotiations to revise the TRIPS Agreement;
use trade policy tools to further encourage IPR policy
reform, including through bilateral investment treaty
negotiations; and seek greater trade enforcement action
through the WTO. See CRS Report RL34292, Intellectual
Property Rights and International Trade.
Shayerah Ilias Akhtar, firstname.lastname@example.org, 7-9253
Ian F. Fergusson, email@example.com, 7-4997
authorizes the International Trade Commission (ITC) to
prohibit U.S. imports that infringe on U.S. IPR. Section
337 cases have been largely patent-focused.
www.crs.gov | 7-5700