I. Proposals to Clarify Present Understandings

The following proposals were made in an academics letter to USTR Ron Kirk following meetings with U.S. officials seeking clarifications of the intent of U.S. proposals in the TPP. Each of the proposals suggests changes to the U.S. TPP proposal as it has been leaked to the public in order to bring the text in line with how officials describe the its intentions. In each area, a specific present U.S. policy would be better protected in a clarified TPP proposal.

A.         Savings Clause for Berne/WIPO Compliant L&Es

Proposal

Clarify that nothing in the TPP, including in the crafting of its three-step test, further limits Parties’ discretion to implement limitations and exceptions that comply with the existing multilateral treaties on copyright, including Berne, WCT and WPPT, including the Agreed Statements to those instruments; add language from the WIPO Internet Treaties Agreed Statement to WCT Article 10 (see, e.g., Chile FTA).

Justification

As recounted in the academic letter to Kirk September 8, 2012:

Consistent with other Free Trade Agreements, the U.S. proposal would likely “confine” limitations and exceptions to exclusive rights under copyright[.] This language, on its face, would apply to limitations and exceptions that are currently not subject to the similarly worded three step test in Article 9 of the Berne Convention for the Protection of Literary and Artistic Works. The United States considers, however, that these so-called Berne “small exceptions” for quotations and other purposes are in compliance with the three-step test in its TPP proposal, were it to be applied to them.

. . .

The United States intends its proposals in the TPP and other trade agreements to be fully consistent with the World Intellectual Property Organization Internet Treaties (i.e. the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty), including all of the Agreed Statements.

Examples

P4 Art. 10.3(4) (“The Parties may establish limitations and exceptions in their domestic laws as acceptable under the Berne Convention for the Protection of Literary and Artistic Works (1971), the TRIPS Agreement, the WCT and the WPPT. These provisions shall be understood to permit Parties to devise new exceptions and limitations that are appropriate in the digital environment.”); Chile FTA (including agreed statement to WCT Art 10).

B. Clarify that 3-Step test is not applicable to definition of scope of rights

Proposal

Make clear that the three-step test does not apply to definitions of the scope of rights, as opposed to limitations of an exclusive right already defined.

Justification

As explained in the September 2012 letter to Kirk:

The United States proposed three-step test would apply only to limitations and exceptions to exclusive rights granted to copyright owners rather than to provisions that delineate the scope of such rights. For example, the absence of an exclusive right of private performance of a copyrighted work in U.S. law would not be a limitation or exception subject to the three-step test.

C.  Confirm discretion to define fixation and “copy”

Proposal

Particularly in reference to any provision on temporary copies, clarify the understanding that parties remain free, through local legislation and interpretation, to define when a transitory use of a work is insufficiently fixed so as to constitute a copy.

Justification

As noted in the September 2012 letter to Kirk:

The United States takes the position that nothing in existing U.S. copyright law, as interpreted by the federal courts of appeals, would be inconsistent with its proposed three-step test. This would include, for example, the transformative use standard recognized in cases such as Bill Graham Archives v. Dorling Kindersley Publishing, Inc., 448 F.3d 605 (2d Cir. 2006) and the holding in Cartoon Network, LP v. CSC Holdings, Inc., 536 F.3d 121 (2d Cir. 2008), concerning the definition of a “copy.”

D. Carve out IP Definition and L&E from Investor-State Dispute

Proposal

Carve out definitions of scope of IP protection and limitation and exception issues from investor-state dispute mechanisms

Justification

The taking of intellectual property is made a potential issue for investor-state dispute resolution in the investment chapter. This raises the troubling possibility that companies could appeal local court rulings or legislative definitions to international courts as a taking of their IP rights. The Uruguay PMI dispute is one case in point. As the September 2012 letter notes:

It is not the intent of the United States that the Investor-State provisions of the TPP would apply to provide causes of action for investors through the intellectual property chapter that could be used to appeal to an international tribunal fair use or other interpretations of the U.S. Copyright Act by U.S. courts. Compliance with intellectual property obligations in international agreements has been a matter of state-to-state consultation and dispute resolution, and the United States does not intend to alter that process in the TPP.

E.         Broaden ISP Safeharbor to reflect US law

Proposal

Broaden the protection in the safe harbor provision for ISP “storage” to include “dissemination.”

Justification

As recounted in the September 2012 letter:

The United States intends for provisions that use language from the U.S. Copyright Act in existing bilateral Free Trade Agreements to which the United States is a party, and in the TPP, to be interpreted as they have been by federal courts in the United States. For example, the safe harbor for internet service providers in other FTAs applies only to “storage” of information at the direction of a user. But U.S. interpretations of the this same language apply the safe harbor beyond the narrow and literal issue of storage to a broader range of user activity, including, for example, the dissemination of information using the network. It is not the intent of the United States to limit any Party’s national safe harbor to one that is literally restricted only to “storage.”

F.         Re-order “Balance” and 3-Step Proposals

Proposal

Re-order the U.S. “balance” and “3-step” proposal to move balance objective first; remove “seek to.”

Justification

The promotion of balance is the primary objective of limitations and exceptions and therefore should go first in the ordering of the norms. Eliminating the “seek” qualifier is necessary to guarantee the outcome, not just the effort, to create balanced copyright systems.  The provision is useful in supporting the 3-step legality of flexible limitations and exceptions (e.g. fair use).

II. Proposals to Alter Prior FTA Standards Between Parties

U.S. law and policy makers are considering a major overhaul of copyright legislation that would require more flexibility in some US FTA provisions between the parties in the TPP than now exist. The fact that FTAs require changing so soon after their promulgation (many FTAs requiring change are not event fully implemented yet) should serve as a warning about the level of specificity appropriate for a trade agreement setting disciplines on domestic regulation. Any commitments in this area need a high level of generality — akin to that seen in the multilateral IP agreements — to ensure that countries have sufficient policy flexibility to adapt to changes in local policy needs and desires.

To accommodate these proposals, the following provisions for a TPP should apply as subsequent agreements between the parties that modify prior commitments on the same issues so that existing FTAs do not pose a barrier to planned policy changes in the U.S.

A.         Copyright terms

Proposal

Change the minimum periods of terms to the Berne/WIPO standard of 50 years after the author’s death. As an option, the provision may provide that parties may protect works for terms of additional lengths with or without formalities or other reasonable conditions.

Justification

The U.S. Registrar of Copyrights has testified to Congress that U.S. copyright law should change to make minimum terms 50 years rather than 70 from the life of the author, with an extra 20 year period subject to a formality (e.g. a renewal application). See “The Next Great Copyright Act.” This policy would meet Berne and WIPO 1996 commitments, but would violate some existing FTAs as well as the U.S. TPP proposal.

B. Exceptions to TPMs

Proposal

In Technological Protection Measures, delete the listed exceptions (ACTA), or clarify that the listed exceptions are permissive (e.g. Chile FTA), and add that a Party may adopt or maintain appropriate limitations or exceptions to any TPM circumvention liability standard (e.g. ACTA 27.8).

Justifications

H.R. 107, 108th Cong (2003) proposed a fair use exception to DMCA TPM protection, which has been referred to favorably by the Librarian of Congress for consideration in U.S. Copyright reform. The White House and Senator Wyden (future Finance Chairman) has endorsed a permanent exception for phone network switching. The Librarian of Congress has proposed broadly reconsidering the permanent exceptions in US DMCA (Sec. 1201). WIPO Internet treaties are permissive in this regard.

Examples

ACTA 27.8 (giving broad discretion to adopt “appropriate” anti-circumvention exceptions); Chile FTA Art. 17.7.5(d) (permitting exceptions in “certain special cases that do not impair the adequacy of legal protection or the effectiveness of legal remedies against the circumvention”); Trans-Pacific Strategic Economic Partnership Agreement (P4) (parties may “establish provisions to facilitate the exercise of permitted acts where technological measures have been applied”) (note that P4 standard does NOT require adoption of TPM circumvention liability in first instance).

C. Parallel importation/Exhaustion

Proposal

Permit international exhaustion. (Note: none of the FTAs with TPP member countries have prohibitions on international exhaustion, but some other US FTAs do have such prohibitions, e.g. Jordan, Morocco).

Justification

Modification of FTA commitments on this subject is needed to accommodate the Supreme Court ruling in Kirtsaeng. See http://infojustice.org/archives/29043

Examples

FTAA Art. 4 ([4.1. This Chapter shall not affect the authority of each Party to determine the conditions under which the exhaustion of rights related to products legitimately introduced in the market by, or with the authorization of, the right holder shall apply.]); P4 (“Parties affirm that they may:(a) provide for the international exhaustion of intellectual property rights); TRIPS Art. 6.

D. Permit Internet Retransmission under Statutory License

Proposal

Alter current FTA provisions to affirmatively permit the use of statutory licenses to permit retransmission of television signals over the internet subject to reasonable compensation.

Justification

The United States has obtained obligations in some FTA’s, such as the U.S.-Colombia Free Trade Agreement, to prohibit adoption of statutory licensing for the retransmission over the internet of broadcast television signals. The U.S. Copyright Act currently contains such licenses for other media (i.e. cable and satellite television). Congress has held hearings on the potential desirability of similar licenses for internet service providers. Alteration of existing FTA standards is necessary to afford Congress the opportunity to address this policy matter as one of first impression.

A.     Special 301 is a Unilateral Adjudication of Foreign Countries for IP Matters both Covered and not Covered Under any Trade Agreement

Special 301 is an offshoot of the more general “Section 301” program which authorizes the USTR to unilaterally sanction foreign countries for domestic laws which either “violates, or is inconsistent with, the provisions of, or otherwise denies benefits to the United States under, any trade agreement” or which does not itself violate any agreement but nevertheless “is unreasonable or discriminatory and burdens or restricts United States commerce.” 19 USC § 2411. One ground for finding an “unreasonable” policy subject to trade sanction includes the denial of “fair and equitable . . . provision of adequate and effective protection of intellectual property rights notwithstanding the fact that the foreign country may be in compliance with the specific obligations of the Agreement on Trade-Related Aspects of Intellectual Property Rights.” 19 USC 2411(d)(3)(VB)(ii). Possible sanctions can include the suspension of “benefits of trade agreement concessions,” “duties or other import restrictions,” or the suspension of General System of Preferences (GSP) benefits. 19 USC 2411(c).

Special 301 is integrated into the Section 301 sanctioning process through a public adjudication and notification mechanism. Under Special 301, the USTR is required to annually publish in the Federal Register a list of countries that deny “adequate and effective protection of intellectual property” or “deny fair and equitable market access for U.S. firms that rely on intellectual property,” and then designate among those countries the subset of worst actors to be designated “priority foreign countries.”  19 U.S.C. § 2242. USTR holds an annual hearing and publishes an annual report containing two levels of “Watch Lists” below the “Priority Foreign Country” designation. As described by USTR in the 2013 report:

Placement of a trading partner on the Priority Watch List or Watch List indicates that particular problems exist in that country with respect to IPR protection, enforcement, or market access for persons relying on IPR. Countries placed on the Priority Watch List are the focus of increased bilateral attention concerning the problem areas.

Designation as a “Priority Foreign Country” is a statutory criteria that triggers a 30-day countdown during which targeted countries must “(enter) into good faith negotiations” or “(make) significant progress in bilateral or multilateral negotiations” or face an investigation under the Section 301 process for determining unilateral sanctions. Priority foreign country determinations are reserved for countries “that have the most onerous or egregious acts, policies, or practices,” that “have the greatest adverse impact (actual or potential) on the relevant United States products,” and for which “there is a factual basis for the denial of fair and equitable market access as a result.”

This framework for unilaterally sanctioning foreign countries for intellectual property matters pre-dates the World Trade Organization’s rules. Indeed, it was the lack of binding international trade adjudication, such as that created under the WTO, which was the primary justification for Congress’s enactment of the 301 unilateral adjudication in the 1980s. [See 301 Historical Primer]. There has always been a serious question as to how the statutory program could continue after the WTO, and there has been one adjudication of the more general 301 program explained below.

One of the noticeable trends in Special 301 in the Post-WTO 1994 period is the steep drop off in listings of countries as a “Priority Foreign Country,” most directly threatening trade sanctions. Only three countries were designated as PFCs after 1994: China in 1996, Paraguay in 1998, and Ukraine in 2001-05. Of these, only Paraguay was a member of the WTO in the year it was list as a PFC. Ukraine was not a WTO member when it was initially listed, but now it is.

B.      Using 301 to Adjudicate TRIPS Violations Would Violate the WTO Dispute Settlement Understanding and U.S. Law

On their face, the 301 complaints against Ukraine do not appear to raise challenges to Ukraine’s implementation of the WTO agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS). The 2013 Special 301 Report describes three grounds for Ukraine’s PFC listing:

[T]he specific grounds for the U.S. Trade Representative’s designation of Ukraine as a PFC are: (1) the unfair, nontransparent administration of the system for collecting societies, which are responsible for collecting and distributing royalties to U.S. and other rights holders; (2) widespread (and admitted) use of illegal software by Ukrainian government agencies; and (3) failure to implement an effective means to combat the widespread online infringement of copyright and related rights in Ukraine, including the lack of transparent and predictable provisions on intermediary liability and liability for third parties that facilitate piracy, limitations on such liability for Internet Service Providers (ISPs), and enforcement of takedown notices for infringing online content.

None of these grounds explicitly refer to complaints under TRIPS. Unilateral adjudication of TRIPS violations is prohibited by Article 23 of the Dispute Settlement Understanding, explaining under the title “Strengthening of the Multilateral System”:

1. When Members seek the redress of a violation of obligations or other nullification or impairment of benefits under the covered agreements or an impediment to the attainment of any objective of the covered agreements, they shall have recourse to, and abide by, the rules and procedures of this Understanding.

2. In such cases, Members shall:

(a) not make a determination to the effect that a violation has occurred, that benefits have been nullified or impaired or that the attainment of any objective of the covered agreements has been impeded, except through recourse to dispute settlement in accordance with the rules and procedures of this Understanding, and shall make any such determination consistent with the findings contained in the panel or Appellate Body report adopted by the DSB or an arbitration award rendered under this Understanding

The import of this language is fairly clear. The Dispute Settlement Understanding (DSU) procedures, and only those procedures, can be used for findings that lead to the “suspension of concessions or other obligations” under GATT.

After the WTO accords went into effect, the U.S. did not dismantle the Section 301 or Special 301 programs, which became the subject of a trade dispute in the WTO in United States – Sections 301-310. In that case, a WTO panel held that Section 301 sanctions were only still legal under the DSU because of a “Statement of Administrative Action” pledging to “base any section 301 determination” on “panel or Appellate Body findings adopted by the DSB” and only sanction countries with “authority from the DSB to retaliate.”

The panel decision went further, discussing in a key package that the U.S. also could not threaten to sanction countries in ways that, if actually implemented, would likewise threaten the WTO:

Members faced with a threat of unilateral action, especially when it emanates from an economically powerful Member, may in effect be forced to give in to the demands imposed by the Member exerting the threat… To put it differently, merely carrying a big stick is, in many cases, as effective a means to having one’s way as actually using the stick. The threat alone of conduct prohibited by the WTO would enable the Member concerned to exert undue leverage on other Members.  It would disrupt the very stability and equilibrium which multilateral dispute resolution was meant to foster and consequently establish, namely equal protection of both large and small, powerful and less powerful Members through the consistent application of a set of rules and procedures.

After this ruling, the USTR has been relatively carefully not to use Special 301 to explicitly threaten other countries with trade sanctions for alleged violations of TRIPS. It more commonly describes Special 301 as being a component of the evaluation of whether it will grant other countries GSP benefits, which it asserts unilateral authority to determine the criteria for. And the criteria listed in the 301 reports most commonly refers to the lack of domestic policies that are “TRIPS-plus” – i.e. go be beyond those required by the TRIPS agreement. But, as explained below, the developed countries do NOT have unilateral authority to determine GSP benefit criteria. Under the reasoning of the Sections 301-310 panel, any country on the various Special 301 Watch Lists would likely have standing to challenge the Special 301 program as threatening denial of GSP benefits for criteria that violate the WTO accords.

C.      TRIPS-Plus standards may be challenged as not being “non-discriminatory” and “non-reciprocal” criteria tailored to “respond positively to the development, financial and trade needs of developing countries.”

The U.S. legal authority for denying GSP benefits based on intellectual property policies is contained in 19 USC 2462(c), requiring consideration of the “the extent to which such country is providing adequate and effective protection of intellectual property rights.” The 2013 Special 301 report signals that it intends to evoke this criteria with respect to Ukraine, stating:

When Ukraine was designated a PFC in the past, it failed to address the grounds for its designation during the following investigation. As a result, Ukraine lost its eligibility for benefits under the Generalized System of Preferences (GSP). Once Ukraine addressed the issues that led to its designation as a PFC, its eligibility for GSP benefits was reinstated.

Thus, the central question under the WTO accords may be: may the U.S. suspend GSP benefits from a country as a sanction for not adopting TRIPS-plus policies? Current law under the WTO Appellate Body provides a strong argument that the U.S. cannot maintain such policies.

The starting point for the trade law analysis is the WTO’s requirement of Most Favored Nation (MFN) treatment for all members, contained in Article I:1 of the General Agreement on Tariffs and Trade 1994 (GATT). The MFN principle requires

any advantage, favour, privilege or immunity granted by any contracting party to any product originating in or destined for any other country be accorded immediately and unconditionally to the like product originating in or destined for territories of all other contracting parties

By withdrawing trade benefits from one country (e.g. Ukraine), but not from other WTO-members, the U.S. GSP program facially authorizes conduct that violates MFN treatment. The conduct must, therefore, be authorized by an exemption to MFN.

GSP programs are authorized by the exception to MFN known as the GSP “Enabling Clause.” The two key provisions in this clause for our purposes are located in Paragraphs 2 and 3. Paragraph 2 (footnote 3) of the Clause states that GSP programs are authorized only in so far as their criteria are “generalized, non-reciprocal and non discriminatory.” Paragraph 3 of the Clause adds the additional requirement that GSP criteria “be designed and, if necessary, modified, to respond positively to the development, financial and trade needs of developing countries.” The use of TRIPS-plus criteria to deny GSP benefits does not appear to meet either standard.

The WTO Appellate Body (the highest court in the WTO and the authority on matters of WTO interpretation) was tasked with interpreting the GSP enabling clause requirements in the case of EC – Preferential Tariffs. The matter involved a challenge by India of the EC’s program to award additional GSP benefits to countries that participated in a special drug eradication program. The Appellate Body held that GSP programs could have criteria that result in different benefits being afforded to different developing countries, but that such differential treatment must itself be based on criteria that meet the Paragraph 3 requirement of responding “positively to the development, financial and trade needs of developing countries.” The Appellate Body explained:

In granting such differential tariff treatment, [ ] preference-granting countries are required, by virtue of the term “nondiscriminatory”, to ensure that identical treatment is available to all similarly-situated GSP beneficiaries, that is, to all GSP beneficiaries that have the “development, financial and trade needs” to which the treatment in question is intended to respond.

The Appellate Body continued:

[T]he expectation that developed countries will “respond positively” to the “needs of developing countries” suggests that a sufficient nexus should exist between, on the one hand, the preferential treatment provided under the respective measure authorized by paragraph 2, and, on the other hand, the likelihood of alleviating the relevant “development, financial [or] trade need”. In the context of a GSP scheme, the particular need at issue must, by its nature, be such that it can be effectively addressed through tariff preferences. Therefore, only if a preference-granting country acts in the “positive” manner suggested, in “respon[se]” to a widely-recognized “development, financial [or] trade need”, can such action satisfy the requirements of paragraph 3(c).

Under this standard, TRIPS-plus criteria may be challenged for being insufficiently related to the needs of developing countries and rather tailored to meet U.S. intellectual property industry export needs. The U.S. is not free to define any “needs” it chooses as GSP criteria for developing countries. The Appellate Body admonished that “a ‘need’ cannot be characterized as one of the specified “needs of developing countries” in the sense of paragraph 3(c) based merely on an assertion to that effect by, for instance, a preference-granting country or a beneficiary country.” Such need, the Appellate Body held, must be assessed according to an “objective,” “[b]road-based recognition of a particular need,” such as those “set out in the WTO Agreement or in multilateral instruments adopted by international organizations.”

Here, the U.S. is on the horns of a dilemma. For the criteria to be sufficiently “broad based,” the WTO Appellate Body suggests that they need to be incorporated into a broad multilateral agreement like TRIPS. But the U.S. cannot unilaterally adjudicate TRIPS disputes.

The specific issues that the U.S. raises — the administration of collecting societies, rules on the government use of copyrighted software, and intermediary liability and “enforcement of takedown notices for infringing online content” are not subject to broad-based international standards. None are explicitly recognized duties under TRIPS. There are very general standards in the WIPO Internet Treaties on copyright in the digital environment, but only a small number of controversial international agreements – in the form of bilateral trade agreements with the U.S. – contain standards on intermediary and third party liability and the enforcement of takedown notices for online infringement. The U.S. would like these to be areas of broad-based agreement, but thus far they are not.

Ukraine may also argue that using removals of GSP benefits as a sanction for disfavored policies and practices is not a “positive” use of GSP benefits. The Appellate body explained that the GSP Enabling Clause “mandates that the response provided to the needs of developing countries be ‘positive,’” which it defined as “consisting in or characterized by constructive action or attitudes.” It continued:

This suggests that the response of a preference-granting country must be taken with a view to improving the development, financial or trade situation of a beneficiary country, based on the particular need at issue.

It is difficult to explain the use of PFC listings under Special 301 as “positive” in this respect. The PFC listing is rather clearly designed as a threat to withdraw benefits as a punitive sanction for acting against U.S. interests, not as an enticement or reward for responding to its own development needs. As one commenter noted: “The EC rewards “good” behavior with extra preferences; the U.S. penalizes “bad” behavior by taking away preferences.” Whether the WTO allows the latter use of GSP criteria as a sanction is yet to be decided by the Appellate Body.

D.     Conclusion

The implications of the two lines of cases discussed above suggest that Ukraine has strong arguments for challenging its PFC listing, and any subsequent denial of GSP benefits, in the WTO. In addition, using the discussion of the prohibition of “threats alone” from the Section 301-310 case, other countries on the various watch lists could challenge Special 301 as implicitly threatening GSP benefit withdrawal for criteria that do not meet the WTO’s standards. Doing so and succeeding would relieve the world of a much hated vestige of the Pre-WTO “aggressive unilateralism” in U.S. trade policy.

To further the administration’s campaign and policy pledges to promote access to medicines and global health, a broad coalition of public health advocates made a public health submission to the Special 301 process pressing the administration to adopt a limiting principle in its trade policy to “[f]orbid the use of threats and punitive actions . . . in response to a country’s use of TRIPS safeguards and flexibilities or refusal to adopt TRIPS-plus measures.”  In a submission to USTR in the 2010 Special 301 process, a coalition of global health groups pressed the Administration to put this principle into effect through an extension of President Clinton’s Executive Order 13155 to all developing countries. The submission argued that the policy of the United States should be:

(a) The United States shall not seek, through Special 301 listing decisions, negotiation or otherwise, the revocation or revision of any intellectual property or pharmaceutical price or competition regulation of any developing country that

(1) promotes access to affordable pharmaceuticals or medical technologies; and

(2) provides adequate and effective intellectual property protection consistent with the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) referred to in section 101(d)(15) of the Uruguay Round Agreements Act (19 U.S.C.  511(d)(15)), the Doha Declaration on the TRIPS Agreement and Public Health, the August 30 Decision system promoting access to generics for countries with inadequate local capacity to manufacture medicines, and the WHA Global Strategy and Plan of Action on Public Health, Innovation and Intellectual Property.

The Obama administration has not come close to following this pro-public health policy. The post-2009 reports continue to press developing and other countries to adopt access to medicines limiting policies in excess of those required by TRIPS, and in excess of the restrictions placed on the Bush Administration’s trade negotiations by the May 2007 New Trade Policy for America. (See previous PIJIP submissions at http://www.pijip-impact.org/special-301/)

a.   Incomplete Embrace of the Doha Declaration

The use of Special 301 to pressure countries to adopt TRIPS-plus intellectual property rules and other policies that limit access to affordable medicines has always stood in uneasy tension with the U.S. commitment to the Doha Declaration on TRIPS and Public Health.

The Bush Administration Special 301 reports rhetorically embraced the Doha Declaration while avoiding its affirming of the rights of countries to use TRIPS flexibilities “to the full” or the commitment that TRIPS “can and should” be interpreted and implemented to promote access to medicines for all public health problems. In the first Special 301 report after the Doha declaration, the U.S. limited its embrace of the Doha declaration to situations to “address a major health crisis, like the HIV/AIDS crisis in sub-Saharan Africa.”  By 2008, the Bush Administration’s stance had moderated somewhat, recognizing the application of the Doha Declaration to “serious public health problems,” rather than only to “crises.”

The Obama Administration’s statements on the Doha Declaration are slightly broader. The 2009 Report eliminates the qualification “serious” from the public health problems Doha was meant to address, explaining: the “United States respects a country’s right to protect public health, in particular, to promote access to medicines for all.”  For the first time, the Report explicitly mentioned support for use of compulsory licenses, stating: “the United States respects our trading partners’ rights to grant compulsory licenses in a manner consistent with the provisions of the TRIPS Agreement.”

The Administration still appears intent on avoiding the Doha Declaration’s affirming of the rights to use TRIPS flexibilities “to the full” and the instruction that TRIPS “can and should” be interpreted and implemented to promote public health and access to medicines. A strong endorsement of these principles would stand in stark contrast to the many TRIPS-plus pressures on medicines issues included in the reports.

b.   Data exclusivity

The most common objection in the Obama Administration Reports related to pharmaceutical policy is a complaint about “lack of protection [in a particular country] against unfair commercial use of undisclosed test and other data.”  The issue arises because of requirements that manufacturers must prove the safety, efficacy, and quality of medicines through clinical trials or other data. When a generic manufacturer subsequently attempts to obtain marketing approval for a therapeutically equivalent medicine, it is normally required to prove only bioequivalence to the already approved drug. In this way, the generic firm relies on the original safety and efficacy data. “Data exclusivity” rules delineate a time period in which a generic firm may not rely on the originator’s data, thus requiring that the generic product either remain off the market or repeat costly and ethically troublesome clinical trials.

The TRIPS agreement requires that certain pharmaceutical test data submitted to registration authorities be protected from “unfair commercial use.”  Article 39.3’s literal scope is relatively narrow.  Importantly, countries have great leeway in defining what use or reliance on test data may be “unfair” or “commercial.”  A World Health Organization paper advises that “[c]ountries are not obligated under Article 39.3 to confer exclusive rights on the originator of marketing approval data,”  and most traditional uses of registration data “to assess the efficacy and toxicity of a pharmaceutical or agrochemical product is not a commercial use subject to Article 39.3.”

The practice of providing a form of exclusivity for pharmaceutical test data originates with the Hatch Waxman Act in the U.S. The Act included a political compromise by providing an avenue for generic firms to register based on originator safety and efficacy data, but prohibiting such reliance in the first five years after the data is filed. In the EU, data exclusivity periods were later enacted that can run as long as eleven years.  These periods operate independently of any period of patent exclusivity, and in the EU have been interpreted to be impervious to compulsory licensing, even in a health emergency.

Most countries in the world do not follow exclusivity rules.  In such countries, the only marketing monopoly companies receive is through the patent system rather than the registration system.

USTR has adopted a legal interpretation of TRIPS that Article 39.3 requires data exclusivity similar to the U.S. or EU. This interpretation is in direct conflict with the negotiating history of the TRIPS agreement, during which the U.S. proposal to require that pharmaceutical test data be “reserved for the exclusive use of the registrant for a reasonable period”  was amended out of the final text.  Despite this rejection of a data exclusivity requirement by TRIPS negotiators, both PhRMA and the USTR have argued that Art. 39.3 of TRIPS requires countries to implement data exclusivity regimes.

The USTR’s use of Special 301 to push its interpretation of Article 39.3 on developing countries displays the inadequacy of Special 301 as a just and neutral adjudicative process and highlights the reason why it violates the WTO. Countries cannot have the right to list and sanction other countries for violating their own interpretation of the WTO accord. The proper route for pressing TRIPS complaints is through dispute resolution.

c.   Registration and Patent Linkage

There has been a subtle change in the Obama administration on the issue of “linkage.”

“Linkage” refers to requirements that FDA-like marketing authorities not register generic copies of medicines for which there is a patent claimed by a supplier. This is an added enforcement process favored by patent holders. It permits them to use patent claims to block marketing of products without the need to sue the alleged infringer in courts to enforce the patent rights. The rule in the US has led to “ever-greening” – where marketing monopolies are extended with new (often baseless) applications for patents that may be used to prohibit marketing approval of generics unless and until the generic firm successfully challenges the patent in court.  Evergreening problems are likely to be more pronounced in developing countries that lack the rigorous patent examination process and other regulatory resources and expertise of the U.S.  TRIPS does not require countries to implement linkage rules.

The 2007 New Trade Policy for America called on the USTR to “eliminate [the] requirement that a drug regulatory agency withhold approval of a generic until it can certify that no patent will be violated if the generic were marketed,” calling instead for the U.S. to work to “strengthen and expedite judicial processes in countries to ensure patent rights of innovative companies are respected.” Nevertheless, USTR continued to demand linkage rules through Special 301.

In 2009, a lack of linkage was the second most cited medicines-related complaint in Special 301 (after data exclusivity). The complaint was normally framed as an alleged failure by countries to “implement an effective system to prevent the issuance of marketing approvals for unauthorized copies of patented pharmaceutical products.”

In 2010, the number of countries cited for similar problems was reduced to eight – Chile, Pakistan, Columbia, Dominican Republic, Ecuador, Egypt, Malaysia and Mexico. Of these, Chile, Columbia and the Dominican Republic are signatories to free trade agreements with the US that already require linkage. The other countries have no outside obligations to enforce linkage rules.

Perhaps more importantly, the language used to define the complaint shifted. Instead of requesting a “system to prevent the issuance of marketing approvals,” as in 2009, the 2010 report asks for “an effective system to address patent issues expeditiously in connection with applications to market pharmaceutical products.”  To be consistent with the 2007 New Trade Policy, such a system could be an effective court adjudication process for the enforcement of patent rights.

d.   Restrictions on Compulsory Licensing

Compulsory licensing is perhaps the most important flexibility in the TRIPS agreement. Despite the express mention of respect for the rights of countries to issue compulsory licenses in the Report, the Obama Administration is continuing to use Special 301 to pressure countries to reduce the use of this important tool to promote public health.

A compulsory license is a government-issued license to one or more competitors permitting entry in the market upon payment of adequate royalties to the patent holder. The Doha Declaration affirms the broad right of all countries to use compulsory licenses to promote access to medicines, stating that each country “has the right to grant compulsory licenses and the freedom to determine the grounds upon which such licenses are granted.”

In 2007, Thailand was elevated to the Priority Watch List (PWL) in large part for its announcement of compulsory licenses for excessively priced medicines needed to treat AIDS and heart disease. The official U.S. complaint was not about the license per se, but rather an alleged failure of Thai government to “engage openly and transparently with the companies that developed the drugs that are at issue.”  In 2009, Thailand was kept on the PWL, noting concerns about “the uncertainty created by the previous Government’s policies concerning the issuance of compulsory licenses on patented pharmaceutical products.”  Thailand remained on the 2010 PWL as well. Although use of the words “compulsory license” was eliminated from the entry, the issue was clearly indicated through the call for Thailand “to engage in a meaningful and transparent manner with all relevant stakeholders, including owners of intellectual property rights, as it considers ways to address Thailand’s public health challenges.”

Other countries were also targeted for pressure. China was singled out for complaints about “the possible use of compulsory licensing for essential patents included in national standards,” and for concerns about “the scope of and procedures related to compulsory licensing.”  And reports noted that “the United States will continue to monitor recent developments concerning compulsory licensing of pharmaceutical and agricultural chemical products in Ecuador.”

e.   Patent Extensions

Under TRIPS, WTO members are required to grant patents for a period of 20 years from the time the patent is filed. This period takes into account the known delays in regulatory processes. But the U.S. has long used Special 301 to pressure countries to extend patent terms for delays in granting patents or marketing approvals for medicines.

In response to the public health concerns with such extensions,  the 2007 New Trade Policy demanded that the U.S. “[e]liminate [the] requirement that an FTA country extend the term of a patent on a pharmaceutical product for delays in the patent and regulatory approval process,” and instead “ensure expeditious patent and regulatory approval.”  In 2009 and 2010, no developing country was targeted for a failure to grant patent extensions to compensate for regulatory delays. But Israel was cited for lack of patent extensions in both reports.

f.    Patentability criteria

One of the key flexibilities in the TRIPS agreement is the ability of a country to decide for itself what inventions qualify for patents for being sufficiently “new,” involving an “inventive step” and being “capable of industrial application.”  In pharmaceuticals, the definition of these terms can determine whether a country grants patents for new uses or formulations of existing products that are already known. The grant of such patents is controversial between countries and among experts and there are no provisions in TRIPS restricting country flexibility in making these basic policy decisions.

Past reports have singled out Brazil, India and Philippines for laws that ban patents on polymorphs (i.e. new forms) and new uses of known inventions.  These complaints press countries to grant patents on a larger range of inventions than TRIPS requires and thereby would limit access to affordable medicines in each country. In the case of India, the claim is particularly troublesome because that country is the largest supplier of generic medicines in the world. The more patents India grants, the less possibility there will be to find a source of generic supply for other countries.

g.    Restrictions on evidence-based reimbursement programs

Beginning in 2009, the USTR included sections on “Supporting Pharmaceutical [and Medical Device] Innovation” that promotes only one narrow pro-innovation policy: convincing other countries to abandon regulatory and reimbursement programs that restrain the high cost of patented prescription drugs. The Reports single out all OECD members and have specifically mentioned Finland, France, Italy, Japan, Korea, Canada, Germany, New Zealand, Taiwan, and Poland for administering “unreasonable . . . reference pricing or other potentially unfair reimbursement policies.”

As in other areas, the use of Special 301 to target reimbursement programs appears linked to a broader international regulatory agenda. Two Free Trade Agreements negotiated under the Bush Administration – with Australia and Korea – included chapters imposing restrictions on pharmaceutical reimbursement programs. During and after the negotiation of these agreements, U.S. state officials repeatedly warned USTR and Congress that the norms adopted in these agreements, if applied to U.S. state governments, would cripple Medicaid programs.  This is because Medicaid programs rely on preferred drug lists to exact lower prices from pharmaceutical companies, which operate very similarly to the formularies and other programs targeted by the US in other countries.

TRIPS does not restrict how countries regulate the market power of companies that is created by patents. Patents on medicines create particularly strong and socially harmful market power because people will pay anything they can for life-savings drugs, there often are literally no substitutes if a truly innovative medicine is under patent, and the burdens of lack of access fall almost exclusively on the poorest people (or, in the U.S., the uninsured).

U.S. state officials appeared at the 2010 Special 301 hearing to “oppose the recent and disturbing use of the Special 301 Report to discipline effective and non-discriminatory pharmaceutical pricing policies.”  Referring to Ambassador Kirk’s expressed “support” for broadening a discussion of a proposal by Pfizer for a new international trade agreement to “discipline” pharmaceutical reimbursement programs in the U.S. and abroad,  the elected state officials explained that U.S. state reimbursement programs “follow the same basic policies and principles of foreign countries that USTR seeks to discipline.” The officials warned: “Reciprocal enforcement of USTR standards to state programs would obliterate the effectiveness of Medicaid pricing programs and threaten the administration’s policy goal of reducing the cost of healthcare in this country.”

The concerns of state officials protesting the use of 301 to criticize reimbursement policies had minimal effect. Future reports continued to target “unfair” reimbursement policies without describing what is unfair about them or how these programs differ from what U.S. states now do to reduce drug prices.

The Special 301 program takes its name from, and builds upon the administrative structure of, Section 301 of the Trade Act of 1974. That Act was passed at a time of large and growing trade deficits, increasing flight of manufacturing activities abroad, the rise of Japan as an industrial giant, skyrocketing foreign debt and economic crises caused by dependency on foreign oil imports, all of which fueled a mood in U.S. policy circles that was “decidedly protectionist.”  U.S. export industries attached considerable blame for the U.S. economic woes on the weak enforcement regimes in the General Agreement on Tariffs and Trade (GATT), and the accompanying inability of the U.S. to enforce free trade commitments abroad.  Section 301 of the Trade Act of 1974 was a key element of the response. The program authorized the President to impose economic sanctions on countries that “burden or restrict United States commerce.”  Notably, the law did not require that the alleged foreign conduct violate any trade agreement with the United States to be subject to sanction under the Act.

At the urging of the pharmaceutical and copyright industries, Section 301 was amended in 1984 and 1988 to expand the policy into intellectual property. The 1984 amendment established “adequate and effective protection of intellectual property rights” as grounds for 301 investigation and sanctions.  In 1988, the statute was amended again to create the new intellectual property-focused “Special 301” program.

Under Special 301, the USTR is required to annually publish in the Federal Register a list of countries that deny “adequate and effective protection of intellectual property” or “deny fair and equitable market access for U.S. firms that rely on intellectual property,” and then designate among those countries the subset of worst actors to be designated “priority foreign countries.”  These requirements resulted in the well-known ‘Watch List’ and ‘Priority Watch List,’ which serve as warning mechanisms to countries perceived as out of compliance with USTR’s preferences on IP policy. Designation as a ‘Priority Foreign Country,’ triggers a 30-day countdown during which targeted countries must “(enter) into good faith negotiations” or “(make) significant progress in bilateral or multilateral negotiations” or face sanctions determinations under the Section 301 process.  Priority foreign country determinations are reserved for countries “that have the most onerous or egregious acts, policies, or practices,”  that “have the greatest adverse impact (actual or potential) on the relevant United States products,”  and for which “there is a factual basis for the denial of fair and equitable market access as a result.”

Special 301 findings are, by intent and definition, unilateral findings by the U.S. and subject to U.S. standards.  As in the original Section 301, foreign practices and policies do not have to contravene any trade agreement with the United States to be found “unreasonable.”  Nor must the U.S. take into account a country’s level of economic development in determining what is fair or unfair—a sharp departure from GATT rules promoting differential treatment for developing countries.

1.   1984-1994

The first use of Section 301 unilateral sanction authority in an intellectual property case followed the 1984 amendments listing a lack of adequate intellectual property protection as a potential ground for a 301 action. The Reagan Administration made quick use of the new powers by launching investigations of two industrializing nations with histories of infant-industry protection: Korea and Brazil. Each case ultimately led to new intellectual property laws being passed in the targeted countries, marking the strategy as a huge success in industry perception.

A 1985 action against Brazil pressed for changes in Brazil’s informatics policy. The U.S. alleged that Brazil failed to adequately protect copyrights in computer software, as part of a broader attack on Brazil’s national import substitution policy favoring domestically produced computers and software. At the time, there was no bilateral or multilateral agreement binding Brazil to grant copyrights on software. But the U.S. threats were successful in pressuring Brazil to alter its policy in 1988, when Brazil amended its copyright law to include computer software protection and pledged to phase out its local purchasing preferences.

A second complaint in 1987 concerned Brazil’s lack of pharmaceutical product patent protection. At least 50 other countries denied patents for pharmaceuticals at the same time period,  and Brazil was not required to grant pharmaceutical patents by any bilateral or multilateral commitment binding it.  Nevertheless, the U.S. carried forward its 301 complaint and used its unilateral authority to impose trade sanctions on Brazil until it changed its law.  Brazil responded with a GATT suit challenging the legality of the unilateral retaliation.  The GATT complaint was never adjudicated, however, because the U.S. blocked the formation of a dispute settlement panel. Sanctions were ultimately lifted in 1990 when a new Brazilian president promised to revise its law to provide pharmaceutical patents.

A 1985 301 case against Korea also included complaints about Korea’s lack of patent protection for pharmaceuticals. That complaint ultimately ended with a bilateral agreement with the US on intellectual property. The agreement required Korea to amend its copyright and patent laws, creating what one negotiator described as a “blueprint for other agreements,” including TRIPS.

The Special 301 program creating watch lists for intellectual property was created in 1988, during the Uruguay Round of GATT negotiations that ultimately produced the TRIPS agreement. During those early years, the US government used Special 301 to pressure countries to accept TRIPS and to punish dissenters.  The US placed many of the leading countries opposing TRIPS in the first Special 301 Report in 1989, including Brazil, India, Argentina, and Egypt.  Two years later, India, China and Thailand became the first countries to grace the Priority Foreign Countries listing, triggering section 301 investigations. Brazil was sanctioned with a loss of GSP benefits in 1988; Thailand lost them in 1989; and India in 1992—all on matters related to pharmaceutical patents. None of the countries were in derogation of any multilateral or bilateral commitment with the U.S.

Through these years, the credible threat of sanction appeared to be the driving policy choice motivating the program. Foreign countries had a great deal to lose from US sanctions that limited access to the broad US market. And because 301 sanctions were determined unilaterally, there was little countries could do to influence the process and resist its negative determination. Accepting the regime shift of intellectual property matters into the multilateral World Trade Organization (WTO) became one strategy of developing countries to get rid of Special 301’s unilateral threats and sanctions.  But that strategy failed.

2.   1994-2008

The passage of the WTO’s agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS)  secured most of the substantive goals on intellectual property policy that the USTR had pursued in the 1980s. Through TRIPS, the WTO included a broad array of minimum intellectual property standards for every member, including product and process patents in every field of technology. And perhaps most importantly, it resolved longstanding U.S. complaints about the lack of enforcement procedures in GATT by establishing a formal and binding dispute resolution process which could authorize trade sanctions for violations.  The dispute settlement provision came with a prohibition on the kind of unilateral adjudication previously effected under Section 301 and Special 301. Article 23.2 of the WTO agreement provides: “Members shall not make a determination to the effect that a violation has occurred, that benefits have been nullified or impaired or that the attainment of any objective of the covered agreements has been impeded, except through recourse to dispute settlement in accordance with the rules and procedures of this understanding.”  It was thus thought by many developing countries that the enactment of TRIPS would spell the demise of Special 301.

The creation of the WTO did not end Special 301. Instead, Congress amended the Trade Act to specify that “[a] foreign country may be determined to deny adequate and effective protection of intellectual property rights, notwithstanding the fact that the foreign country may be in compliance with the specific obligations” of TRIPS.

Although the legality of the continuation of Special 301 under the WTO is open to question, as described below, continue it did. The number of countries identified on Special 301 watch lists steadily increased in the post-WTO years while the number of countries designated as PFCs, and therefore under the most immediate threat of economic sanctions, dropped off dramatically. Only three countries were designated as PFCs after 1994: China in 1996, Paraguay in 1998, and Ukraine in 2001-05. Of these, only Paraguay was a member of the WTO in the year it was listed as a PFC.

The increasing use of watch lists and decreasing use of PFC designations reflect a shift in the primary mechanism of coercion under Special 301. Whereas in the pre-1994 period the US appeared to be relying on a credible threat of sanctions as its main tool to promote compliance with its wishes, after the WTO the main tool of persuasion was “to give countries the feeling that their behavior on intellectual property was the subject of constant surveillance.”  For this purpose, it was more important to list many countries as subject to the watchful gaze of USTR than it was to actually impose sanctions.

3. Does Special 301 Violate the WTO?

The reduction of PFC determinations likely reflected concerns about the legality of unilaterally imposing economic sanctions on foreign countries within the WTO framework. Indeed, in 1999, a WTO Dispute Settlement Panel reviewed the use of Section 301 in non-IP cases and held that the U.S. could not use 301 to impose unilateral trade sanctions without going through the WTO dispute settlement process.  Similarly, unilateral sanctions imposed under Special 301 would appear to be a clear violation of the WTO agreement.

The continued use of Special 301 watch lists after the establishment of the WTO, absent implementation of actual sanctions, evidences a conclusion by the U.S. that watch lists alone do not implicate the multilateral dispute resolution mandate. This conclusion is far from clear, however.

By its plain terms, the dispute settlement understanding is not limited to a ban on unilateral imposition of economic sanctions, but rather extends to a prohibition of any member making “a determination to the effect that a violation has occurred.”  Under U.S. law, the Special 301 process is an administrative adjudication – it is a rule bound procedure for determining whether other country laws are consistent with a statutory standard.  The statutory standard includes determinations as to whether foreign country laws “violate provisions of international law or international agreements to which both the United States and the foreign country are parties.”  In the results of Special 301 adjudications, USTR frequently determines that countries are in violation of U.S. interpretations of the TRIPS agreement, for example in failing to adopt “data exclusivity” regulations as the means for implementation of TRIPS Article 39.3. As such, the process appears to violate the WTO dispute settlement understand both facially and as applied.

There is also basis in WTO jurisprudence for seeing the Watch Lists themselves as trade barriers. In the 1999 dispute settlement decision on Section 301, the WTO panel explained that the “threat alone” of unilateral sanctions outside the dispute settlement process risks undermining the basic principle of WTO legitimacy:

“Members faced with a threat of unilateral action, especially when it emanates from an economically powerful Member, may in effect be forced to give in to the demands imposed by the Member exerting the threat… To put it differently, merely carrying a big stick is, in many cases, as effective a means to having one’s way as actually using the stick. The threat alone of conduct prohibited by the WTO would enable the Member concerned to exert undue leverage on other Members.  It would disrupt the very stability and equilibrium which multilateral dispute resolution was meant to foster and consequently establish, namely equal protection of both large and small, powerful and less powerful Members through the consistent application of a set of rules and procedures.”

This language in the panel decision appears to be a shot across the bow of the Special 301 Watch Lists, but no member has brought a challenge against the program in the WTO yet.

The paper from the Yale project is not ready for pubic release. One of my recommendations to the students was that they publish it because it contains a lot of great information, especially on some relatively recent cases that have used the right to heath to interpret or trump various maximalist versions of intellectual property laws affecting access to pharmaceuticals. Here is a quick overview of some of those key cases.

Tribunal Constitutional [T.C.] [Constitutional Court], 25 enero 2013, Rol de la causa: 2.411-13-CPT, p. 50 (Chile)

This case was brought by generic firms against local implementation of a “linkage” system, like that put in place by Hatch Waxman in the US, that allows a patent holder to get an injunction against a potential generic entrant through an expedited procedure. The generics claimed that it was a violation of an equal protection mandate because only pharmaceutical companies received this procedure. In interpreting the issue, the court looked toward the right to health as an interpretive principle and found the linkage legislation unconstitutional.

The Central Intellectual Property and International Trade Court, Oct. 1, 2002, Aids Access Foundation, Mrs Wanida C, & Mr Hurn R. v. Bristol-Myers Squibb company and the Department of Intellectual Property, BC Tor Por 34/2544, RC Tor Por 93/2545

Court used the right to health as a factor in the decision to grant patients standing to challenge a patent. The Court described access to medicine as “fundamental” to life and health, holding that “the injured parties from the grant of Patent are not limited to the manufacturers or the sellers of [the] medicine protected by the Patent.”

Sankalp Rehabilitation Trust v. F. Hoffmann-LA Roche AG, OA/8/2009/PT/CH (2009) (India)

Gave standing in patent challenge to NGOs with an interest to “bring the drug within the reach of the community for whom [the NGO] works, not only because of reduction in cost, but also because of increase in supply.” The court noted that “public interest is a persistent presence in intellectual property law.”

F. Hoffmann-LA Roche AG v. Cipla Ltd., I.A 642/2008 IN CS (OS) 89/2008 (2008) (India)

Court used the right to health to construct the proper balance of interests that should be considered in evaluating a request for a preliminary injunction involving a medicine patent. The court held that “unlike in cases involving infringement of other products, the Courts have to tread with care [when] pharmaceutical products and more specifically life saving drugs are involved. In such cases, the balancing would have to factor in unknowns such as the likelihood of injury to non- parties and the potentialities of risk of denial of remedies.” It continued: “the Court cannot be unmindful of the right of the general public to access life saving drugs which are available and for which such access would be denied if the injunction were granted. The degree of harm in such eventuality is absolute; the chances of improvement of life expectancy; even chances of recovery in some cases would be snuffed out altogether, if injunction were granted. Such injuries to third parties are un-[compensable]. Another way of viewing it is that if the injunction in the case of a life saving drug were to be granted, the Court would in effect be stifling Article 21 [which protects the right to life] so far as those [who] would have or could have access to [the medicine].”

Cipla Medpro v. Aventis Pharma 2012 (139/12) (S. Afr.)

Held that the “broader public interest, and not only the interests of the litigating parties” must be considered in evaluating a requested injunction by a patent holder to halt marketing of a generic competitor.

Patricia Asero Ochieng, Maurine Atieno, Joseph Munyi, & AIDS Law Project v. Attorney General, (2009) Petition No. 409 (Kenya) at 28-29 para. 52

Struck down an “anti-counterfeiting law” that the court held would negatively impact the marketing of legitimate generic medications. The Court held that the law “would have the effect of limiting access, . . . would ipso facto threaten the lives and health of the petitioners and others infected with HIV and [AIDS], and would be in violation of their rights under the Constitution.” Although recognizing the legitimate interests of the government in passing legislation to regulate counterfeiting, it scrutinized the means used under a standard resembling heightened scrutiny: “Had the primary intention been to safeguard consumers from counterfeit medicine, then the Act should have laid greater emphasis on standards and quality.”

Cámara Federal de Apelaciones [CFed.] [Federal Appeals Court], 1/2/2011, “Novartis Pharma AG c. Monte Verde SA / propiedad industrial e intellectual,” Causa No. 5.619/05 (Arg.)

Court rejected an argument that TRIPS Art. 39(3) requiring protection against unfair uses of commercial data required implementation of a data exclusivity regime barring generics from relying on originator clinical data to approve biosimilar products. The court used the right to health in its balancing of factors, holding: “[t]he reasonability of an impugned legal regime is better understood when one reads it in light of international human rights obligations.”

Tribunal Administrativo de Cundinamarca [Administrative Court of Cundinamarca], Sala, Lab. Febrero 29, 2012, Carlos Enrique Moreno Rubio, Expediente No. 2009-00269-01, (p. 53) (Colom.)

Court rejected a request for a compulsory license on Kaletra, an AIDS medication, but held that the drug’ price must be controlled by government to ensure broad access to it. The case held that “the right to health requires that budgetary and procedural aspects” to promote access to affordable medications, and those mechanisms must “be made viable and balanced.”

Conclusions

Some of the these cases (e.g. Colombia) were brought by access to medicines campaigns. Many others were not, but rather ended up addressing right to health arguments within litigation between private parties. Taken as a whole they show a lot of promise for the potential of right to health arguments to play a key role in judicial decision making that can have real impacts on access to medicines in particular countries. There is no current campaign by advocates to use these potential channels more deliberately. Whether there should be such a campaign was a point of discussion at the meeting with no firm conclusion. To succeed there would need to be a better coordination between human rights lawyers and access to medicines advocates than now exist. A prime consideration is whether forming such an alliance would be at the expense of existing resources or would grow the existing (dwindling) support for civil society advocacy in this area.

Special 301 is an informal agency adjudication to unilaterally determine foreign countries that should be listed on various “watch lists” for lack of “adequate and effective” intellectual property protection.  Countries listed on the highest list – as a “priority foreign country” are slated for trade sanctions under the statute, which pre-dates the World Trade Organization accords and its multilateral dispute resolution process.

One quick reflection on the day is that it is clearly becoming more and more difficult for the 301 Committee (which is dominated by USTR staff and its views) to adjudicate between an increasing number of disputes in fact and policy in the process.

One of the key problems with the 301 process is that there is no dedicated staff to investigate every intellectual property law around the world. One junior staffer at USTR is in charge of creating the report each year, which often extends beyond 100 pages and covers over 40 countries. To fill those pages with the facts required to determine whether countries meet the “adequate and effective” standard, the process relies on industry complaints. Before 2010, industry  and country filings were due on the same date – inhibiting countries from making any response to the allegations against them. And so the reports normally took uncontested facts to be true, and turned out reports in which industry compliant flowed rather cleanly from the filings into the report.

Since 2010, countries have been given a few more days for their filings that private entities, affording a small chance for rebuttal. Most countries on the list still choose not to participate in the process, which is often described by foreign government officials as being meaningless and illegitimate at best, and likely a violation of the World Trade Organization ban on unilateral trade adjudications. But some countries still fear the repercussions of being listed and there is a clear trend toward more countries challenging IIPA and PhRMA assertions in their filings. This year, for example, Korea filed a point by point rebuttal to all IIPA and PhRMA submissions, pointing out what it called “factual errors” throughout those submissions in their descriptions of Korean law and policy. Ukraine also filed a lengthy submission and brought in a top official from Ukraine for the oral hearing to dispute many of allegations against it. This puts USTR in a bind. How will it determine who is right when there are real disputes of fact in a record given the lack of adjudicatory resources or process?

In the past, the report has chosen sides from a conflicted record with little explanation as to how it determined facts. One might expect a similar pattern this year. But such denial of a conflicted record de-legitimates the process and also sets it up for legal challenges. Under the Administrative Procedures Act, USTR and the rest of the Committee is bound to act rationally — without arbitrary or capricious factual findings or legal determinations. Its failure to explain why it selects some versions of the truth over others may leave it vulnerable to challenge by affected countries under this standard.

PIJIP has made submissions to the USTR Special 301 process over the last several years on behalf of its faculty and staff and other public interest organizations. These submissions are archived at www.pijip-impact.org/special-301

PIJIP’s past submissions have had an emphasis on several core concerns:

• that the 301 process and report fails to implement stated U.S. policy promoting balanced intellectual property policy on major public interest issues, including on policies affecting access to affordable medications in poor countries and promotion of users’ rights in copyright policy;
• the definition of what is “adequate and effective intellectual property protection” cannot follow a one size fits all model where every country in the world is expected to have the same rules and interpretations as possessed by the United States – such a norm ignores the painful fact of gross income disparity in developing countries which incentivizes monopoly holders to price the great majority populations (at least 90%) out of the market;
• the process for considering public submissions is inadequate and leads to arbitrary and capricious outcomes in the report; and
• the current use and operation of the program as a set of increasingly serious “watch lists” ending in a priority foreign country listing with a specific trade sanction process violates the World Trade Organization’s ban on unilateral adjudication of trade disputes.

Today I focused on the subject of balance, which raises another issue where the process is being forced to adjudicate between competing views. The issue here is whether there is and should be a duty of the process to promote the protection of users’ rights as well as those of copyright and other IP right holders. With the growth of the internet economy, largely based in the U.S. and dependent on users’ rights in copyright for their existence — the issue is increasingly hard for U.S. trade policy to ignore.

Under Section 182 of the Trade Act of 1974 (Trade Act) (19 U.S.C. 2242),  USTR is required to identify foreign countries whose policies fall under two criteria:

• those which “deny adequate and effective protection of intellectual property rights”  and
• those which “deny fair and equitable market access to U.S. persons who rely on intellectual property protection.”

As the implementing agency under the statute, USTR has great discretion in how to interpret these clauses. In the past, it has essentially concluded that protection means only the affirmative protection for rights holders, not the affirmative protections in intellectual property law afforded to users. We assert that these requirements should be interpreted by USTR to include consideration of the degree to which countries deny adequate and effective intellectual property users’ rights, which it has failed to do in past reports.

Trade policy has been changing on this issue. As USTR recognized in its recent position in the Trans-Pacific Partnership Agreement negotiations, for copyright policy to serve its dual objective of promoting the creation of protected works and also to promote the creation of new works that may transform or excerpt from the prior works – copyright policy must contain a balance between owners’ and users’ rights. USTR explained:

“the balance of rights and exceptions and limitations achieved in U.S. law provides diverse benefits for large and small businesses, consumers, authors, artists, and workers in the information, entertainment, and technology sectors.”

And this is true as well of the balance required in foreign laws. If other countries provide only strong protections of copyright owners, with insufficient protections of the rights of users, then U.S. businesses large and small will be negatively affected in their ability to access foreign markets. Thus, in USTR’s words, limitations and exceptions to rights are an integral part of the overall policy – “[a]n important part of the copyright ecosystem”  – not a subversion of a general rule. They are, in other words, part of the “protection” within the intellectual property system.

To be true to this principle in express U.S. policy, countries that lack major elements of balance in their copyright system should be identified and encouraged to change their laws, just as the process does for countries that lack U.S. style patent protections or copyright protections. The 301 process should, for example, advise countries to consider adopting limitations and exceptions that have the hallmark of fair use – its flexibility to adapt to new technology and contexts. The lack of such flexibility should be flagged as an element of a copyright system that makes it less adequate and effective in protecting the rights of businesses and users that rely on users rights in copyright systems, and such deficiencies should also be flagged as posing a potential market barrier to US businesses – especially internet and technology businesses.

A list of countries that would receive listing for inadequately balanced copyright systems is included in an appendix to our submission. Two countries are worthy of special mention.

PANAMA

The impact of USTR policies over the last two decades is painfully apparent in Panama’s response to the 301 notice. In this year’s submission, Panama sought to assure USTR of its “strong commitment to protect IPR, in a constant, effective and inflexible way.”

“Inflexible” as a goal of a copyright system? Unfortunately, this does not appear to be a mere translation error. As we have covered at some length in the infojustice blog, Panama made recent changes to its Copyright law to implement one of the most inflexible Copyright Acts in the world.

This year, in a free trade agreement implementing statute, Panama created copyright protections on “temporary” storage on the internet, with no protection for the kind of buffer copies necessary for popular and fully licensed streaming services. It has no fixation requirement. And no exception for transient copies. Both of which are in US law.

So companies like Pandora, youtube, Netflix are pretty much illegal in Panama unless they pay for licensing for both content and buffer copy. That is not the US rule. This a “market access” problem that should be included int he 301 report if it is committed to balance.

At the same time, Panama removed a section of its law that created broad fair use rights and added a provision that all limitations and exceptions in its law must be strictly interpreted. And it paired this reduction in rights for consumers and internet companies with a new bounty system that allows its copyright enforcement officials to personally profit from fines collected from copyright infringers of the kind its law will make of almost every internet user.

This is a horrible law that will drastically reduce opportunities for US information providers to enter the panama market and as such should find a place in 301 listing.

COLOMBIA

USTR frequently uses 301 to pressure other countries to open up the transparency of its policymaking processes for pharmaceutical companies. It should express similar concerns in countries where consumers are locked out of policy making processes on copyright. Colombia is a prime example.

Colombia’s recent FTA implementation statute is a model of the kind of unbalanced process and product that USTR should object to. On process, the Congress rushed through a full legislative reform in a week, avoiding constitutionally mandated public “readings” in the proper committees. Partially based on this failure, the Constitutional Court struck down the law earlier this year. See http://infojustice.org/archives/28380

The US should comment on that process and encourage the government to consider a full range of views.

The US should take a stand on substance as well. Like Panama, Colombia extended copyright to temporary copies on the internet with no fixation requirement and no exception for transient copies. It also implemented retransmission rights through a clause that exempted the right from all limitations and exceptions.

Photo: Architect of the Capitol

Today the Fair Access to Science and Technology Research ACT (FASTR) was introduced in both the House and Senate.  FASTR was sponsored by Senators Cornyn and Wyden and Representatives Doyle, Yoder and Lofgren.

The legislation requires federal agencies that fund research to develop a “public access policy” for federally funded academic papers.  The policies required by the bill would provide for “free online public access to such final peer reviewed manuscripts or published versions as soon as practicable, but not later than 6 months after publication in peer-reviewed journals; [and] providing research papers … in formats and under terms that enable productive reuse, including computational analysis by state-of-the-art technologies.”

In a press release, Rep. Doyle said “This bill will give the American people greater access to the important scientific research results they’ve paid for. Supporting greater collaboration among researchers in the sciences will accelerate scientific innovation and discovery, while giving the public a greater return on their scientific investment.”

Open Access advocates applauded the legislation:

• PIJIP Director Michael Carroll- “The bill promotes the public interest in a number of ways.  It would codify the principle that the public is entitled to free online access to the research it funds, and it recognizes that access alone is insufficient.  It would require agencies to explicitly enable researchers to use state-of-the-art technologies to analyze the literature, and it requires agencies to study whether the best way to enable reuse is through an open copyright license.”
• SPARC Executive Director Heather Joseph - FASTR “represents an important step forward in the legislative progression toward the goal of Open Access to publicly funded research. Based on the framework laid out by the highly successful NIH Public Access Policy, (as well as the previously-proposed Federal Research Public Access Act) the bill proposes terms and conditions that fully enable digital reuse of publicly funded research articles – as well as calling for their timely, barrier-free availability.”

For more information on the bill:

• SPARC FAQ for the Fair Access to Science and Technology Research Act (FASTR)
• Peter Suber: Major new bill mandating open access introduced in Congress

PIJIP organized a letter from international academics and experts on the bill while it was being negotiated, criticizing its rushed process and imbalanced substance. On substance, the letter noted that “the Bill provides for significantly less balance than do the laws of many other countries, including the United States, which is also bound by the terms of the FTA,” and specifically noted “a number of areas in which the Bill fails to link the enhancement of proprietor rights with a correlative limiting principle, or to make a new right subject to generally applicable limitations and exceptions” that would exist under US law.

Anticipating this moment, the letter suggested “some specific areas of choice to which a renewed deliberative process might devote attention.” The Court’s action provides the opportunity for Colombia to revisit these issues and produce a more balanced outcome for Colombia’s citizens and businesses.

Some news on the ruling is at:

http://www.elespectador.com/noticias/judicial/articulo-398450-corte-tumbo-ley-de-derechos-de-autor-conocida-ley-lleras

http://www.lafm.com.co/noticias/colombia/23-01-13/corte-declaran-inexequible-la–13

http://www.elpais.com.co/elpais/colombia/noticias/cae-restriccion-uso-internet-ley-reglamentaria-tlc

Back stories at:

http://infojustice.org/archives/author/marcela-palacio-puerta

http://infojustice.org/archives/author/carobotero

This ‘ancillary copyright‘ (text here) law would require search engines and other purveyors of information on the internet (but not publishers of “journalistic citations”) to pay licensing fees for showing headlines and snippets of news articles. The proposal is bad policy, and also appears illegal under international law. 

This Thursday, the Parliament takes this bill up for a key vote, and if it moves forward there, it may spread around the continent. France is already exploring it and two weeks ago EU Commissioner Barnier focused on news publishers in a major copyright address.

Google is the clear target, and it today launched a petition in opposition (google.de/deinnetz in German only for now). There is also a broad coalition of groups that’s come together to stop it, but according to Derek Slater at Google “it’s got a real risk of passing in advance of federal elections next year.”

My views:

The proposal is bad policy that would stifle public discourse on the internet and likely hurt rather help German content providers (i.e. if the main result is that search engines to linking to German press).

Professor Michael Carroll, who teaches Cyberlaw at American University, described the proposal this way:

“This proposed law conflicts with the basic operating principles of the Internet and with the basic quotation right recognized in international intellectual property law. Imagine if this sort of law had been in place before the Web got started — would search engines have even come about in a world where you have to get permission to innovate?”

“It shall be permissible to make quotations from a work which has already been lawfully made available to the public, provided that their making is compatible with fair practice, and their extent does not exceed that justified by the purpose, including quotations from newspaper articles and periodicals in the form of press summaries.”

Germany’s proposal to tax quotations would almost certainly run afoul of Berne.

This is one clear example of the importance to consumers and important segments of US business of including mandatory limitations and exceptions in international intellectual property law, such as that being crafted in the Trans-Pacific Partnership.

It also raises an interesting question for the U.S. under the Special 301 review of foreign country IP laws — if Germany passes this proposal, will be denying U.S. companies like Google “adequate and effective” intellectual property protection ensuring “fair and equitable” market access? That would be a real test of the whether the U.S. takes a balanced approach in its much criticized implementation of the law.

For more on the Panamanian Copyright law, see:

Panama Passes Incredibly Unbalanced Copyright Bill, http://infojustice.org/archives/27372

Overview of Panamanian Reactions to Passage of Copyright Legislation, http://infojustice.org/archives/27432

Sign On Letter to the President of Panama Regarding Bill no. 510, http://infojustice.org/archives/27447

Panamanian Copyright Bill (no. 510) Approved by Congress, http://infojustice.org/archives/27368

Copyright in Latin America: New Enforcement Measures Pose Major Threats to Internet Users in Panama and Colombia, http://infojustice.org/archives/27403

Is Panama About to Pass the Worst Copyright Law in History?, http://infojustice.org/archives/27344