USTR Toughens IP Stance On China, Russia, Thailand; Praises EU, Brazil

By William New
The United States Trade Representative’s office on 30 April announced the elevation of its pressure on China, Russia, Thailand, and others to better protect US intellectual property rights. But the announcement stirred reactions by accentuating the increasingly political-sounding criticism by developed countries of Thailand’s decision to utilise flexibilities under international trade rules allowing countries to manufacture cheap versions of patented drugs.

Brazil, meanwhile, was taken off the “watch list” of USTR’s annual so-called Special 301 process for improvements in copyright enforcement. It will be monitored under a so-called “out-of-cycle” review, along with the Czech Republic and Pakistan, and reassessed in a year. A USTR official told reporters that Brazil’s recent declaration that the antiretroviral drug Efavirenz is of public interest, which could lead to a compulsory license, had not worked against Brazil but would be considered in the upcoming review.

This year’s report is also marked by the results of the first province-by-province analysis of China, seen as the largest source of pirated and counterfeit goods globally. Russia risks losing US support for a multilateral agreement on the country’s accession to the World Trade Organization, a US trade official said in a telephone press briefing. And a contributing reason for Thailand’s elevation on the list is its decision to issue compulsory licenses for three pharmaceuticals (two HIV/AIDS drugs and a heart disease treatment), allowing the use of the patented material to produce cheaper versions, an official said.

“The [Bush] administration’s top priorities this year continue to be addressing weak IPR protection and enforcement, particularly in China and Russia,” the report said. “Although this year’s Special 301 report shows positive progress in many countries, rampant counterfeiting and piracy problems have continued to plague China and Russia, indicating a need for stronger IPR regimes.”

The report contains separate sections on “counterfeit pharmaceuticals”, “intellectual property and health,” and “supporting pharmaceutical innovation,” which tout the advantages of strong IP protection. For Thailand, one of the reasons cited for its elevation is “the further indications of a weakening of respect for patents” by issuing the compulsory licenses, even though it was not accused of violating WTO rules.

“While the United States acknowledges a country’s ability to issue such licenses in accordance with WTO rules, the lack of transparency and due process exhibited in Thailand represents a serious concern,” the report said. “These actions have compounded previously expressed concerns such as delay in the granting of patents and weak protection against unfair commercial use for data generated to obtain marketing approval.”

‘Bullies and Hypocrites’

In response to questions from reporters, USTR stressed that the compulsory licenses were only one factor among many longstanding concerns in Thailand, such as copyright protection. But Knowledge Ecology International (KEI), an advocacy group, reacted strongly. “The sanctioning of countries for using legitimate and important flexibilities in the TRIPS agreement brings shame to all US citizens who are increasingly seen in Thailand and elsewhere as bullies and hypocrites,” KEI Executive Director James Love said in a statement. KEI said Thailand has been “highly” transparent in its issuance of the licenses, which the government has said repeatedly since taking the decisions in December and January.

“Since Thailand is acting legally, the USTR makes vague allegations that while Thailand has the ‘ability’ under the WTO rules to issue such licenses, there was something undefined that the USTR cannot or will not explain that was worth citing on the 301 list,” Love stated. “If Thailand actually did something the US claims is contrary to US trade policy, the USTR should at least be able to explain it. What is the “due process” for the 301 list? We should not be giving the impression to the world that US pharmaceutical industry lobbyists can use USTR to settle commercial disputes, entirely outside of the framework of global trade rules.”

In addition to analysing individual provinces in China, the report singles out “notorious markets” around the world, such as China’s Silk Street Market or Russia’s allofmp3.com, the world’s largest server-based pirate music website. US copyright industry sources indicate that perhaps 90 percent of all copyrighted materials sold in China were pirated in 2006, the report said.

A copyright industry group praised the report, while also pointing out shortcomings. Dan Glickman, Chairman and CEO of the Motion Picture Association of America said the report “provides important leadership for dealing with the global scourge of piracy.” But Glickman criticised the decision to return Canada to the lower watch list despite US industry pressure to elevate it for failing to stop filming of new release movies that then end up on the Internet. “Canada should have been elevated to the Priority Watch List,” Glickman said.

China Standards-Setting in Sights

The report also cites concern over China’s treatment of intellectual property in standards-setting. It also specified concern with China’s “lack of clarity in laws involving generic drug patent infringement” and China’s “protection against unfair commercial use for data generated to obtain marketing approval.” A similar concern was cited in a number of countries, such as India, where Swiss pharmaceutical company Novartis has legally challenged India’s new patent law.

As mandated by the 1974 US Trade Act and amended by later agreements, every year at the end of April, USTR issues the report listing countries it deems to “deny adequate and effective protection for IPR or deny fair and equitable market access for persons that rely on intellectual property protection.” Those deemed most problematic are designated as “priority foreign countries,” followed by the “priority watch list” and the “watch list.” Countries that fail to respond are threatened with losing the trade benefits the US government unilaterally provides for access to its market known the Generalised System of Preferences, and ultimately, trade sanctions.

In addition to China and Russia, on the priority watch list this year are Argentina, Chile, Egypt, India, Israel, Lebanon, Thailand, Turkey, Ukraine and Venezuela. There are 30 countries on the watch list (see below).

Perhaps reacting to a negative portrayal by some of the annual report, which gives USTR a unilateral wedge against smaller economies, the trade office this year emphasised the positive side of the report as well.

Positive Changes Too

The report “isn’t only about complaints and problems,” a US trade official said. Removed from the watch list altogether were Bahamas, Bulgaria, Croatia, the European Union and Latvia. The EU change was mainly due to its adoption of new regulations on geographical indications (products deriving their names from geographical locations or characteristics) after an adverse 2005 WTO dispute settlement panel ruling, USTR said.

The report also highlighted USTR’s focus on Internet piracy. It said, for instance, that the United States will continue to use bilateral trade negotiations to elevate countries’ protection levels, and will continue to press other countries to implement two 1996 copyright treaties at the World Intellectual Property Organization, the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty

The United States also will continue to provide technical assistance to trading partners, will work with WTO members to implement the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), possibly using dispute settlement consultations where necessary to encourage implementation. It also will continue to push for discussion of implementation of TRIPS enforcement provisions in the WTO TRIPS Council, along with the European Union, Japan and Switzerland, it said.

The watch list this year includes: Belarus, Belize, Bolivia, Brazil, Canada, Ecuador, Hungary, Indonesia, Italy, Jamaica, Kuwait, Lithuania, Malaysia, Mexico, Pakistan, Philippines, Poland, Romania, Saudi Arabia, Taiwan, Tajikistan, Turkmenistan, Uzbekistan, and Vietnam.

There is also a watch list of countries that recently completed free trade agreements with the United States, including Colombia, Costa Rica, Dominican Republic, Guatemala, Peru and Korea, all of whom were on the watch list last year.

William New may be reached at wnew@ip-watch.ch.