THE U.S. POSITION ON DEVELOPING TRADE AGREEMENTS CONCERNING INTELLECTUAL PROPERTY
Linda S. Lourie Attorney-Advisor U. S. Patent and Trademark Office Office of Legislative and International Affairs Washington, DC
The cornerstone of the U.S. Government's position on developing trade agreements is the principle that a liberalized system of international trade based on nondiscrimination and the elimination of trade barriers is essential to global economic well-being. With that in mind, this discussion of international trade agreements begins and ends at the World Trade Organization (WTO) and with the Agreements concluded under its auspices. The Clinton Administration views the Agreement on Trade-Related Aspects of Intellectual Property Rights (the TRIPS Agreement, administered by the WTO) to be one of the major achievements of the Uruguay Round negotiations that took nearly a decade to complete. The TRIPS Agreement established an international foundation for the protection of intellectual property on which to build, correct deficiencies, and incorporate protection for emerging technologies.
To highlight the significance of TRIPS, it is useful to review the key provisions of the Agreement. By creating obligations to conform their laws to certain minimum requirements for the currently 132 member countries [1], the TRIPS Agreement significantly improves the level of protection for all forms of intellectual property, worldwide, for countries at all stages of development. Important to the transition to the new WTO system is that while developing countries must have provided national treatment and a Most-Favoured-Nation provision by 1 Jan. 1996, they have an additional four years, until 1 Jan. 2000, to bring their regimes into conformity with their other obligations. Least developed countries have an additional 10 years, until 1 Jan. 2006, to meet the same goals.
The Agreement is not ideal for the USA because we had to accept regrettable deficiencies and weaknesses in the system, including aspects in the area of biotechnology, in coming to terms with our negotiating partners on a package of improved world standards for intellectual property protection. On balance, though, the USA sees the TRIPS Agreement as an achievement far beyond that which was thought possible at the outset of the negotiations. In the field of patents, for example, the Agreement limits the ability of member States to continue to exclude broad areas of technology from coverage under their patent laws.
The Agreement specifies minimum rights in a country to which patent owners are entitled and establishes a patent term of at least 20 years measured from the filing date of the patent application. Such a period is substantially longer than that which many developing countries currently provide and in some cases may be longer than the term of 17 years from the granting of the patent that existed in the USA prior to enactment of the implementing legislation. The TRIPS Agreement does not provide for new rights or concepts. Rather, it codifies standards for granting and enforcing intellectual property rights (IPR), namely copyrights and related rights, trademarks, geographical indications, industrial designs, patents, layout designs of integrated circuits, trade secrets, and unfair competition laws. TRIPS references older substantive treaties, such as the Paris Convention for the Protection of Industrial Property and the Berne Convention for the
Protection of Literary and Artistic Works, which are administered by the World Intellectual Property Organization (WIPO). What sets this agreement apart from the Paris and Berne Conventions as they stood prior to the Uruguay Round is that member states must comply with enforcement provisions, and more importantly, a system for the resolution of disputes has been established.
For the first time in any multilateral intellectual property agreement among a large number of countries, the TRIPS Agreement sets out detailed obligation to ensure that rights holders can enforce their IPR effectively, both within WTO member countries and at their borders. The TRIPS Agreement specifies that patent owners must be able to prevent unauthorized parties from making, using, offering for sale, selling, or importing for those purposes any patented product and, if the patent claims a process, from using the process or using, offering for sale, selling, or importing for those purposes the product produced by the process. The Agreement spells out both the civil and criminal penalties that must be available to rights holders and the procedures to be followed to obtain those remedies. While some of the enforcement provisions of the TRIPS Agreement are ambiguous, they represent a large step forward for protection of IPR.
Moreover, TRIPS also imposes strict conditions that must be met before any compulsory license can be granted under a patent to ensure that compulsory licensing is not used to undercut the protection otherwise required for patents. Compulsory licensing for nonworking, that is, for not manufacturing a product or using a process in a particular country, may now be allowed only if the patent owner fails to supply the country's market either through manufacture in the country or importation from abroad.
None of the obligations of the TRIPS Agreement would be assured without the means to resolve disputes if a member State does not live up to them. The Final Act of the Uruguay Round provides for resolution of disputes through the Understanding on Rules and Procedures Governing the Settlement of Disputes (the Dispute Settlement Understanding). That Understanding builds on the dispute settlement practice developed under the General Agreement on Tariffs and Trade (GATT) during its 45 years of practice.
Under the WTO's umbrella, however, dispute settlement is used to resolve any dispute that arises in connection with any of the Uruguay Round's agreements. The Dispute Settlement Understanding created an Appellate Body to consider challenges to any legal interpretations made by panels. Adoption of panel reports and decisions of the Appellate Body will be automatic, unless all of the WTO members agree that a report or decision should not be adopted. This prevents countries from blocking adoption of decisions as was done with some frequency in the past with the GATT.
As of June 1997, the USA had initiated 30 individual consultations to the WTO dispute resolution mechanism, of which 10 were intellectual property-related cases. The first decision for the enforcement of TRIPS recently was issued by the TRIPS panel, and upheld by the Appellate Body, for one of these disputes brought by the USA. The panelists in this case found that India failed to comply with its obligations under the TRIPS Agreement to provide the required mailbox system and for not providing exclusive marketing rights for pharmaceutical and other chemical products during the period before it, as a developing country, is obligated to meet all of its TRIPS obligations. This first decision for the enforcement of the TRIPS Agreement augurs well for the future of international intellectual property protection.
The negotiations behind the TRIPS Agreement are not wholly static, however, as established by the Agreement itself. Currently, there is much talk in international agriculture and environmental circles that 1999 will be the year of major revisions to the TRIPS Agreement. Such expectations may be
exaggerated. To explain why this is so, it may be useful to examine the provisions of the Agreement and the legal and negotiating difficulties that led to the U.S. government's position to oppose attempts to renegotiate that agreement. Article 27.3(b) of the TRIPS Agreement provides for the protection of the long-standing practice of selective breeding. This provision obliges Members to protect microorganisms and to provide for the protection of plant varieties either by patents or by an effective sui generis system or by any combination thereof. Article 27.3(b) continues by stating that "The provisions of this subparagraph shall be reviewed four years after the date of entry into force of the WTO agreement," in other words, in 1999. Much has been made of this sentence by some developing countries who understand this to mean that they will have a second chance to minimize their obligations under this provision. Notwithstanding the fact that the 1999 review (not revision) will merely concern this subparagraph, any notion that a review will result in a weakening of the provision demonstrates an incomplete understanding of the history of the negotiations.
The U.S. government is committed to seeking a strengthening of Article 27.3(b). In submitting the Uruguay Round implementing legislation to the 103d Congress in 1994, President Clinton issued a Statement approved by Congress, explaining that:
"WTO Countries must make patent protection available for essentially all fields technology, including pharmaceuticals, microorganisms, and non-biological and microbiological processes. While they may deny patent protection for plants, they must provide for the protection of plant varieties either by patents or by an effective sui generis system or a combination of these two forms of protection. The USA provides both patent protection and Plant Breeders' Rights. Those member countries that choose to implement a sui generis system of protection for plant varieties may adopt a system consistent with the International Convention for the Protection of New Varieties of Plants (UPOV Convention). The Agreement on TRIPS calls for the level of protection provided to plants and animals to be reviewed four years after the date of entry into force of the WTO Agreement. At that time, the USA will seek improved patent protection for plants and animals."
The "improved patent protection for plants and animals" called for by President Clinton is being discussed by the USA, particularly in seeking to incorporate by reference the 1991 revision of the UPOV Convention in Article 27.3(b), in the same way that treaties such as the Paris Convention and Berne Convention are incorporated elsewhere.
As provided for in the TRIPS Agreement, amendments to raise the levels of protection of rights to conform to the levels in other multilateral agreements may be adopted by the Ministerial Conference without a further formal acceptance process. Major revisions of the Agreement, on the other hand, may be attained in one of two ways, either by convening a Round (such as the Uruguay a Round) or by proceeding on an expedited basis. The latter method is accomplished by establishing a later-in-time treaty, whose membership is the same as that of the WTO, to incorporate the new elements into TRIPS. In light of the experience in the Uruguay Round negotiating process, a consensus would be difficult to achieve in either scenario.
Some countries call for a broader revision of the TRIPS Agreement in light of the Convention on Biological Diversity (CBD). The U.S. position is in opposition to such a revision and, in addition, it believes that it would not be a realistic goal. First, the revision process is lengthy and requires consensus -- the Uruguay Round lasted a decade. It cannot be overemphasized that a revision of any provision is a serious and major operation. Second, the TRIPS Agreement is binding on its members, including its members who also are member States of the CBD. This, in the view of the USA, does not present any difficulties, as it is the position of the USA that the provisions of the CBD do not conflict with the TRIPS Agreement.
The USA believes that the only proper fora for any international, multilateral review of patent or plant variety protection are within the WTO, WIPO, or UPOV structures, where appropriate. The unions of these organizations composed of member States, often with consultation with interested private sector groups, are the only bodies authorized to renegotiate international intellectual property standards. The Food and Agriculture Organization (FAO) of the United Nations' Commission on Genetic Resources for Food and Agriculture, for example, is not the intergovernmental organization to consider these questions, and the current position of the USA is to oppose any attempt if such a proposal were to be presented.
Moreover, some countries at a recent session of the FAO Commission expressed interest in developing national or international sui generis systems (or both) to protect traditional farmers' varieties, traditional farmers' knowledge, or farmers' traditional knowledge. To permit farmers to sell or market seed, including seeds of varieties owned by others, would contravene rights owned by plant breeders who have developed innovative seeds in exchange for the protections they enjoy in many countries. The U.S. Government believes that the intellectual property system is not the appropriate vehicle through which to attempt to achieve social or moral policy goals. Rather, other regulatory agencies within a government may take that role.
At the Conference of Parties to the CBD, some countries argue that IPR and technology associated with the protection of the environment should be coordinated in some manner. This is a meaningless argument since technology as an applied science does not necessarily incorporate any type of IPR. Intellectual property is an umbrella term referring to various economic rights granted for a limited period of time that a country provides to those who meet the requirements established by its law for a particular kind of exclusive right. These economic rights are intended to encourage certain behavior viewed as being in the public interest but cannot preclude those innovations that may not be in the public's best interest. For example, patents are intended to encourage inventive activity and to ensure disclosure of any inventions developed by that activity. Such disclosure allows others to learn of the invention and to build on what has been learned not only in the field of technology relevant to the invention but in other fields as well. While a patent provides the owner with the right to exclude others from making or using or other acts, it does not grant a right to the owner to make or use the invention. In the USA, some governmental agencies are empowered by statute to regulate the manufacture or use of those innovations that are not necessarily in the public's best interest. Nevertheless, as indicated supra, the U.S. Government does not believe that regulation of what is or is not in the public's best interest is the role of the patent system.
In order to stimulate the development of patent and other intellectual property systems in other countries, the U.S. Government strongly encourages implementation of, and compliance with, TRIPS or bilateral intellectual property agreements that provide TRIPS-plus protection through the Special 301 annual review process. This process, named for the relevant provision of the Trade Act of 1974, as amended, examines in detail the adequacy and effectiveness of intellectual property protection in more than 70 countries. It reflects the U.S. Government's continued commitment to aggressive enforcement of the protection of intellectual property and is undertaken with close consultation with affected industry groups. On 30 April of each
year, the U.S. Trade Representative publicizes the names of countries whose laws or ineffective enforcement of such laws do not meet their international obligations by assigning them to action categories. In 1997, for example, one trading partner was placed at the Monitoring level, 10 on the Priority Watch List 36 on the Watch List, and 11 others warranted Other Observations. Each category represents a different action or lack of action that the President will take. Retaliatory action ranges from a warning of an additional out-of-cycle review to imposing trade sanctions. No trade sanctions were imposed as a result of the 1997 review, although should monitoring reveal slippage in a country's enforcement of its bilateral intellectual property agreements with the USA, the U.S. Trade Representative may recommend that the President impose sanctions.
The Special 301 process is used to achieve results for U.S. intellectual property owners who inform the U.S. Government about problems they are experiencing in markets around the world. Such results often include passage by our trading partners of legislation consistent for the most part with international standards that improves their intellectual property regimes, increases their enforcement efforts, or establishes bilateral agreements that more formally lock in commitments of our trading partners to correct problems identified by the USA regarding adequate and effective protection of intellectual property. Recognizing its obligations under the TRIPS Agreement, the USA concludes regional and bilateral agreements that neither create closed regional trading blocs nor erect new barriers to nonparticipants. Neither of these types of programs would be permitted under the TRIPS Agreement's requirement of Most-Favoured-Nation treatment that mandates that any advantage, favor, privilege, or immunity provided to nationals of any country must be provided to nationals of all WTO members. To date, the USA has entered into such agreements with Trinidad and Tobago, Sri Lanka, Jamaica, Ecuador, and recently, Nicaragua. Negotiations also have begun on a bilateral intellectual property agreement with El Salvador and Honduras. In addition to bilateral efforts, the USA also has been participating in regional exercises to discuss and educate countries on issues relevant to intellectual property protection and enforcement. These exercises include Asia-Pacific Economic Cooperation (APEC), the Free Trade Area of the Americas (FTAA), the Trans-Atlantic Business Dialogue (TABD), and the Gulf Cooperation Council (GCC). Such efforts, while not aimed at actual negotiations, are beneficial to educating countries about TRIPS obligations and encouraging them to meet them in an accelerated manner.
Regionally, the USA, along with Mexico and Canada, is a signatory to the North American Free Trade Agreement (NAFTA) signed in 1992. The intellectual property chapter of NAFTA establishes certain minimum 'levels for both acquiring and enforcing protection for intellectual property in these three countries. Among its key intellectual property provisions are the protection of computer programs as literary works, the rights granted to producers of sound recordings to control the reproduction and distribution of the sound recordings, restrictions on the use of compulsory licenses, and the protection of trade secrets.
The USA is currently participating in an effort to eventually establish a trade agreement among 34 countries in the Western Hemisphere, under the Free Trade Area of the Americas (FTAA). The FTAA Intellectual Property Working Group, established in Cartagena, Colombia, in March 1996, is working to complete terms of reference that are contributing to preparations for negotiations on an intellectual property chapter in the FTAA. Among the issues that the Group has addressed are TRIPS implementation and education, emerging technologies, and immediate actions to improve enforcement of
intellectual property protection throughout the Hemisphere. At the Ministerial Meeting held in Belo Horizonte, Brazil, in May 1997, the Trade Ministers recommended to the Heads of State that FTAA negotiations begin in 1998. It is anticipated that negotiations will result in a single, comprehensive agreement that will include intellectual property issues. The Intellectual Property Working Group will be transformed into a negotiating group to address issues relevant to the negotiation of additional standards for the protection and enforcement of intellectual property in the context of an FTAA. Principally, a basic philosophy of intellectual property law, and indeed of the U.S. economy, is that, for the most part, market forces will provide a balance for the allocation of scarce resources. Therefore, the USA strongly opposes treaty provisions that regulate commerce, including such practices as compulsory licensing, where private contracts should be allowed to form to the mutual benefit of the parties involved.
The USA is determined to ensure the adequate and effective protection of IPR and fair and equitable market access. The USA also is committed to the implementation and enforcement of the TRIPS Agreement, other WTO agreements, and its bilateral and regional agreements because it also believes that a strong and open system of international trade will enable all countries to benefit in this interdependent world.
------------------------------ [1] Thirty additional countries, most of which are developing countries, are seeking membership.
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