Intellectual Property Rights (IPR) and International Trade




Updated January 25, 2021
Intellectual Property Rights (IPR) and International Trade
Background
comparative advantage internationally. A range of U.S.
industry relies on IPR protection. Yet, lawful limitations to
What is intellectual property (IP), and how is it
IPR, such as “fair use” copyright exceptions for media,
protected? IP is a creation of the mind embodied in
research, and teaching, can also add value. Many traded
physical and digital objects. Intellectual property rights
goods and services are IP-based, and the licensing and fees
(IPR) are legal, private, enforceable rights that governments
generated from the use of IP specifically form a component
grant to inventors and artists. IPR generally provide time-
of services trade.
limited monopolies to right holders to use, commercialize,
and market their creations and to prevent others from doing
Developed countries traditionally have been the source of
the same without their permission (acts referred to as
IP, but emerging markets also are becoming major
infringements). IPR are intended to encourage innovation
providers of IP. Globally, by country, the United States is
and creative output. After these rights expire, other
the largest trader in IP charges for the use of IP, while the
inventors, artists, and society at large can build on them.
EU, as a bloc, is the largest (see Figure 1).
Figure 1. IPR Trade for Selected Countries, 2019
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 symbols.
Trade secrets protect confidential business information that
is commercially valuable because it is secret, including
formulas, manufacturing techniques, and customer lists.
Geographical indications (GIs) protect distinctive

products from a certain region, applying primarily to
Source: WTO, 2019 data in 2020 statistical review.
agricultural products.
Note: Charges for use of IP include proprietary rights and licenses.
EU reflects extra-EU trade for current EU membership.
What is the congressional interest? The congressional
Historically, the United States has been the top filer of
role in IPR and international trade stems from the U.S.
patents under the World Intellectual Property Organization
Constitution. Congress has legislative, oversight, and
(WIPO) Patent Cooperation Treaty (PCT) system. In 2019,
appropriations responsibilities in addressing IPR and trade
China (58,990 applications) overtook the United States
policy. Since 1988, Congress has included IPR as a
(57,840) for the first time as the top filer (total global filings
principal trade negotiating objective in trade promotion
of 265,800), but analysts raise questions about the
authority (TPA), a time-limited authority that Congress uses
indicators of innovation and China’s patent quality.
to establish trade negotiating objectives and procedures to
consider implementing legislation for trade agreements.
What is the extent of IPR infringement? Quantifying IPR
infringement is difficult, given its illicit nature, although
“To promote the Progress of Science and useful Arts,
some estimates of trade in counterfeit and pirated goods are
by securing for limited Times to Authors and
in the hundreds of billions of dollars per year worldwide.
Inventors exclusive Right to their respective Writings
Innovation can be costly and time-consuming, but IPR
and Discoveries” and “To regulate Commerce with
infringement often has relatively low risk and potentially
foreign Nations” - U.S. Constitution, Article 1, Section
high profit. The digital environment heightens such
8, stipulating powers of Congress
challenges. In FY2019, U.S. Customs and Border

Protection reported making 27,559 seizures of IPR-
The context for congressional interest may include policy
infringing goods at U.S. borders valued at $1.5 billion, with
concerns such as: the role of IPR in the U.S. economy; the
China the largest source.
impact of IPR infringement on U.S. commercial, health,
Trade Policy Tools for IPR
safety, and security interests; and the balance between
protecting IPR to stimulate innovation and advancing other
How are IPR and international trade related? The use of
public policy goals.
trade policy to advance IPR internationally emerged with
What is IP’s role in the U.S. economy
the 1994 North American Free Trade Agreement (NAFTA)
and trade? IP is
and World Trade Organization (WTO) 1995 Agreement on
considered important to U.S. economic growth and a
Trade-Related Aspects of Intellectual Property Rights
https://crsreports.congress.gov

Intellectual Property Rights (IPR) and International Trade
(TRIPS Agreement). These agreements build on IPR
comparable IPR standards, the United States has potential
treaties, dating to the 1800s, which WIPO administers.
issues with each. For example, U.S. negotiators may seek to
Newer treaties also have been concluded under WIPO,
address the differing U.S. and EU approaches on GIs and
notably the “Internet Treaties,” which addresses IPR issues
trademarks. In addition, all three potential partners may
in the online environment that TRIPS does not.
seek to address trade secret theft.
What is the WTO TRIPS Agreement? The TRIPS
What are other trade policy tools to support IPR?
Agreement sets minimum standards of protection and
 The “Special 301” report, by the Office of the U.S. Trade
enforcement for IPR. It includes provisions on:
Representative pursuant to the Trade Act of 1974 as amended,

identifies countries with inadequate IPR regimes on “watch
WTO nondiscrimination principles;
lists.” Trade secret theft, including through cybercrime, is a
 application of the WTO’s binding dispute settlement
growing focus.
mechanism for IPR disputes;
 Section 337 of the amended Tariff Act of 1930 authorizes the
 a balance of rights and obligations between protecting private
International Trade Commission (ITC) to prohibit U.S.
right holders and securing broader public benefits; and
imports that infringe on U.S. IPR. Section 337 cases have been

largely patent-focused.
flexibilities for developing countries in implementation and for
 Under U.S. trade preference programs, such as the Generalized
pharmaceutical patent obligations—extended in November
System of Preferences (GSP), the United States may consider
2015 for least developed countries (LDCs) until January 2033
a developing country’s IPR policies and practices as a basis for
or until they are no longer LDCs, whichever is earlier.
offering or suspending duty-free entry to certain products from
The 2001 WTO “Doha Declaration” committed members to
the country.
interpret TRIPS to support public health and access to
Issues for Congress
medicines.
Why are IPR trade issues actively debated? Congress
What are U.S. IPR trade negotiating objectives? Since
may use a possible renewal of TPA, which expires on July
the advent of TRIPS in 1995, U.S. IPR trade negotiating
1, 2021, to reaffirm and or change U.S. trade negotiating
objectives have been to ensure that U.S. FTAs “reflect a
standard of protection similar to that found in U.S. law”
objectives on IPR for future U.S. trade agreements. U.S.
(“TRIPS
trade policy generally promotes expansion of IPR. Yet, IPR
-plus”), and to apply existing IPR protection to
digital media through adherence to the WIPO “Internet
and trade involve a range of stakeholder interests. IPR
Treaties.” These objectives have evolved
provisions in USMCA and other trade negotiations sparked
in TPA, renewed
debate on the role of patents and data exclusivity, for
in June 2015 (P.L. 114-26). The 2015 TPA largely
incorporates the 2002 TPA’s IPR objectives, as well as
example, in incentivizing innovations and supporting
affordable access to medicines. The ongoing Coronavirus
including new objectives on addressing cyber theft and
Disease 2019 (COVID-19) pandemic has heightened some
protecting trade secrets and proprietary information. The
of these concerns. As digital trade grows, copyright issues
2015 TPA also has an objective of ensuring that agreements
negotiated “foster innovatio
intersect with debates about ISP liability, cross-border data
n and access to medicines.”
flows, data privacy, and cyber theft of trade secrets creating
What IPR issues are on the U.S. trade negotiating
potential sources of controversy.
agenda? The United States has 14 FTAs with 20 countries
How should the United States strengthen and enforce
in force with protections that exceed TRIPS. In January
IPR commitments in emerging markets? Emerging
2017, President Donald Trump, upon taking office,
economies, such as China, India, and Brazil, present
withdrew from the proposed Trans-Pacific Partnership
significant IPR enforcement concerns. For example, the
(TPP), signed in February 2016, which would have
Trump Administration imposed Section 301 tariffs on
expanded (WTO-plus) IPR commitments. Similar
China in part due to China’s lack of respect for IPR and
provisions are in the United States-Mexico-Canada
forced technology transfer obligations; the U.S.-China
Agreement (USMCA), such as:
“phase one” trade agreement, signed in January 2020,
 pharmaceutical patent protections, with measures to protect
includes some Chinese commitments to strengthen IPR but
public health, consistent with TRIPS;
does not address most U.S. concerns. In other emerging
 copyright protections, penalties for circumventing
markets, the United States has sought bilateral and
technological protection measures, online intermediary
multilateral engagement to revise TRIPS; other trade policy
liability limitations (“safe harbor”), and “fair use” goals;
tools (e.g., bilateral investment treaty negotiations, Special
 enhanced trademark protection and disciplines for GIs, with
301) to further encourage IPR-related reforms; and greater
measures to ensure that widely used geographic terms are
trade enforcement in the WTO. The Biden Administration
available for generic use; and
and Congress may consider what combination of measures
 enforcement through civil, criminal, and border measures,
form an effective strategy to address IPR issues. See CRS
including new criminal penalties for trade secret cyber theft,
Report RL34292, Intellectual Property Rights and
clarification that criminal penalties apply to infringement in
International Trade.
the digital environment, and ex officio authority for customs
agents to seize counterfeit and pirated goods.
Shayerah I. Akhtar, Specialist in International Trade and
Finance
The Biden Administration may seek to negotiate IPR
Ian F. Fergusson, Specialist in International Trade and
provisions in the trade negotiations it may undertake,
including with the United Kingdom (UK) and the European
Finance
Union (EU). While these economies have generally
IF10033
https://crsreports.congress.gov

Intellectual Property Rights (IPR) and International Trade


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https://crsreports.congress.gov | IF10033 · VERSION 15 · UPDATED