Bridges Weekly Trade News DigestVolume 14Number 16 • 5th May 2010

US Lists IP Complaints in Special 301 Report


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The United States has released a report of its intellectual property grievances, placing a dozen countries - including Canada, China and India - on its “priority watch list” for IP violations.

Washington insists that the report, which is published annually, is essential to the protection of US economic interests, but critics say that it is wrongly used to intimidate developing countries into adopting US-style IP policies that could keep essential medicines out of the hands of the poor.

The theft of US intellectual property overseas is “an export killer of American businesses and a job killer for American workers” USTR Ron Kirk said on Friday. Washington’s annual listing of IP complaints, which is known as the Special 301 report, “is important because it serves as the foundation for a year-round process used to secure meaningful reforms,” he added.

The report - which is named for a section of the US Trade Act of 1974 - has been published every year since 1988, when amendments included in the Omnibus Trade and Competitiveness Act made it mandatory. This year’s version was released on 30 April.

The report certainly has its critics, and they have been more vocal than usual this year.

Representative Henry Waxman, a California Democrat and the chair of the House Committee on Energy and Commerce, wrote a strongly worded letter to the USTR last week, arguing that the 301 process has gone too far in the past.

The reports have “repeatedly left an impression that the United States is willing to narrow our trading partners’ rights under TRIPS and, in turn, ignore or dismiss altogether their public health needs in favour of increased pharmaceutical protections,” Waxman wrote, referring to the WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights.

The public health group Médecins Sans Frontières also slammed the report, accusing the US government of “threatening” and “bullying” developing countries.

“The terrible irony is that these pressure tactics would, if successful, limit the scope of actions countries can take to promote access to generic medicines, and undermine even the US government’s own global health efforts,” said Emi MacLean, US director of MSF’s access to medicines campaign.

Whether and how the 301 report leads to actual policy changes outside the United States is difficult to say, although the political pressure it generates can be significant.

“Countries don’t like to be on the watch list,” said Sean Flynn, Associate Director of the Program on Information Justice and Intellectual Property at American University’s Washington College of Law. In an interview, Flynn noted several examples of “listed” countries that updated their IP laws before any international agreement required them do to so. The threat of actual trade sanctions is relatively small: the US has suspended trade benefits on only a few occasions over the past 15 years, Flynn said. But countries may fear that being tagged on the “watch list” could scare away foreign direct investment or hurt their political ties with the United States.

That sentiment may not hold true in Canada, which has been on the priority watch list more than once, according to Canadian law professor and digital rights activist Michael Geist. “As a starting point, it should be noted that the Canadian government does not take this exercise particularly seriously,” he wrote on his blog on Friday, noting the heavy influence that some members of US industry have over the contents of the report. He called the process “an embarrassment” and “a bullying exercise.”

The US pharmaceutical industry certainly stands by the 301 process. Christopher Singer, the president of the Pharmaceutical Research and Manufacturers of America - an association that represents a number of major drug makers - applauded the report in a statement issued on Monday.

“Worldwide respect for intellectual property is the engine that will enable patients around the globe to receive the benefits of future discoveries of life-saving medicines,” Singer said.

USTR holds first-ever public hearing

In a first, the USTR held an open hearing to solicit opinions from the public as it prepared the 301 report for 2010. Civil society - namely public health advocates - made a significant contribution to the day-long consultation, which was held in March. The hearing “had some noticeable effect” on the report’s content, said Flynn, who took part in the consultation. “As a whole,” however, the report “is still very bad for access to medicines,” he added.

This year’s report has taken a small step in the right direction on one front, Flynn noted. The most promising development, he said, is on the subject of what’s known in the IP world as “linkage.”

Several countries, including the US, forbid their drug regulatory agencies from approving a new medicine for the domestic market if any patent has been “claimed” on the drug, regardless of whether that patent has actually been granted. Such requirements are controversial even in the United States, where some public health advocates claim that the linkage requirement encourages drug companies to continuously re-file patents for minor improvements to existing products (a practice known as “ever-greening”). The requests can be challenged in court, but while the new patent is being litigated - a process that can easily take years - the “claimed” drug still has the market to itself.

In recent years, the USTR “has been pushing similar rules in other countries,” Flynn said, even in places that do not have especially robust patent application systems. This has triggered fears among some public health advocates that large pharmaceutical countries will be able to “game the system” in developing countries, thus making medicines less affordable for the countries’ citizens.

But the USTR’s stance on “linkage” changed this year. Instead of pushing the policy across the board as it has in the past, this year’s report mentions the issue only in the case of countries that have already agreed to establish such policies in free trade deals with the US, Flynn noted. To public health advocates, this shift represents a small step in the right direction.

Other sections of the report are less promising, critics have said. In some places, they argue, the report directly contradicts commitments that the US government has made in other contexts.

The Doha Declaration on TRIPS and Public Health, a statement that WTO members - including the US - adopted in 2001, explicitly grants signatory governments the right to require pharmaceutical companies to hand over patents on specific drugs. The declaration also gives members “the freedom to determine the grounds upon which such licences” - which are known as compulsory licenses - are granted. The 301 report reiterates this point, noting that the US “respects our trading partners’ rights to grant compulsory licenses.”

But the report is not consistent on this front, noted James Love, Executive Director of Knowledge Ecology International. Elsewhere in the report, the USTR mentions compulsory licensing in its listing of complaints against China (which made the priority watch list) and Ecuador (which made the watch list, one step below).

ICTSD reporting.

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