On February 23, the Special 301 Committee held its third annual opening hearing as part of its review of foreign countries’ intellectual property policies. The committee was chaired by Assistant U.S. Trade Representative for Intellectual Property and Innovation Stan McCoy. Committee Members from the following agencies were represented: USTR, State, Homeland Security, Commerce, Labor, Agriculture, Library of Congress, Customs & Border Patrol, and the Patent & Trademark Office. Not present (for the third year in a row) were any representatives from the Department of Health & Human Services, USAID, or the President’s Emergency Plan for AIDS Relief (PEPFAR) – a point noted by many who testified.
[Click here for the Agenda/Witness List.]
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American Society of Composers, Authors and Publishers Global Intellectual Property Center Knowledge Ecology International International Intellectual Property Alliance
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Jaroslav Zajicek from the Embassy of the Czech Republic was the first to testify. He noted that Czech enforcement efforts are increasing and open markets of infringing goods are disappearing. Seizures of infringing physical copies are down because they are no longer the main means of distribution. The Czech government has a campaign to increase public education about piracy, which reaches universities, companies, government authorities, and judges. Zajicek also said that rightholders (including Philip Morris), and industry groups have noticed the improvement in intellectual property in the Czech Republic.
McCoy asked him to provide more information on online enforcement. Zajicek said that the new Czech enforcement strategy was just approved by the government. The Embassy can provide the Special 301 Committee with an English translation of the strategy. Furthermore, the EU is revising its directive on online enforcement, and the Czech Republic will accept it as guidance once it is completed.
Pawel Pietrasienski from the Embassy of Poland testified that his country should be removed from the Special 301 list because it has demonstrated its commitment to strengthening IP. He cited growing numbers of seizures of infringing goods and prosecutions against distributors, and said his government was committed to increasing them each year.
McCoy asked him to elaborate on online enforcement and on market access for pharmaceuticals. Pietrasienski replied that the pharmaceutical issue has nothing to do with counterfeiting or IP. It is a matter about reimbursements. Regarding online enforcement, he said that consultations are taking place with the EU, which has several inquiries regarding the internet and IP. Another Committee member asked if border inspections were growing, and what is driving the increase in overall seizures. Pietrasienski stressed that the Polish government is intentionally increasing seizures each year, across the board.
Salvador Behar from the Embassy of Mexico provided many statistics on seizures of infringing goods and prosecutions of IP crimes. Mexico has no backlog of IP cases, even though the number of cases is increasing. It participates in various international negotiations on IP, including both WIPO and ACTA, and it carries out bilateral enforcement actions with the U.S. government. The copyright office public education campaign publishes textbooks describing the problems with IP infringement that are used by all elementary schools countrywide. Behar closed his statement saying that Mexico is fulfilling all the necessary requirements to be able to sign ACTA. It may take time, but Mexico is committed to signing it.
McCoy asked Behar to elaborate on enforcement in the digital environment, and Behar responded that Mexico is reviewing its law to make sure it complies with the WIPO internet treaties. They will upgrade the law if necessary.
The next witness was Jimmy Web, Vice Chairman of the American Society of Composers, Authors and Publishers (ASCAP), which licenses and collects royalties for over 400,000 members. ASCAP has a reciprocal relationship with other performing rights organizations (PROs) overseas – ASCAP collects royalties for foreign artists and they collect royalties for American artists. Since American music is popular worldwide, the collection of royalties overseas is an important source of income – about one third of all the royalties that ASCAP collects. When the reciprocal relationship breaks down, American artists don’t get paid.
Web said that the Bahamas are among the worst violators of performance rights of American songwriters. Bahaman businesses refuse to even negotiate with their nation’s PROs, and the courts have proven incapable of enforcing performance rights. It is critical that the U.S. government use the Special 301 Report to encourage the Bahaman government to pressure their cable operators and others to comply. Web also singled out China, saying it pays far too little in royalties (China pays less in overall royalties than Honduras). China has one authorized PRO, but the reciprocal agreement with the US PROs doesn’t work in practice.
McCoy asked Web to comment on how the music industry is changing, and how the changes make foreign royalty payments more important. Web repeated that overseas royalty payments are a third of ASCAP’s income, and said it is essential to cement global agreements with all foreign PROs.
Judit Rius from Médecins Sans Frontières (MSF) expressed her disappointment that DHHS did not attend the hearing, and that civil society from developing countries did not get a chance to participate. MSF delivers care to people in more than 70 countries, and they need greater access to affordable generic medicines and diagnostics. Patients in developing countries are deprived of medicines because 1) the medicines do not exist; they have not been developed, or 2) high prices make them unattainable. Strong intellectual property protection blocks generic competition, making prices high, and Special 301 is used to pressure countries to adopt TRIPS-Plus IP that exceeds international requirements – contributing to high prices.
The problem of access to medicines does not only affect people with AIDS – medicines for cancer and for non-communicable diseases are important as well – but the AIDS crisis has illustrated the need for greater generic competition. More than 6 million people are on antiretroviral treatment for HIV/AIDS in developing countries, and this is only possible due to generic competition. MSF is highly reliant on Indian generics. PEPFAR is also highly reliant on Indian ARVS – more than 98% of the drugs they use are Indian generics. Still, 10 million people are in urgent need of treatment.
As more people remain on antiretrovirals, more of them will require second line treatments as they develop resistance to first line. Prices are much higher for the second line drugs, and IP protection is more common.
MSF is concerned with USTR pressure to change laws that have strict standards of patentability. TRIPS Article 27 requires countries to offer patent protection for all inventions, but flexible implementation of this obligation – especially India 3(D) – is important for continued generic competition. The U.S. government, MSF, and others have benefitted from India 3(d).
The US government should use its policies to ensure sustainable access to medicine and to drive innovation.
In her closing comments, Rius noted a new jurisprudence in the U.S. that are reevaluating the concept of obviousness in patent law, and asked the Committee if it has affected what USTR recommends to other countries regarding their patentability standards. The Special 301 Report should include the Committee’s interpretation of Paragraph 4 of the Doha Declaration and the obligations in the World Health Organization Global Plan of Action– and how this affects the outcome of the Special 301 process.
Krista Cox from Essential Inventions opened her testimony by saying she was disappointed that DHHS, USAID, and PEPFAR were not in attendance. Essential Inventions exists to distribute medicines. It is involved in several compulsory licensing cases, and though it has not won a compulsory license yet, it has created pressure on patent holders. For instance, Abbott lowered its price for Ritonavir after Essential Invention’s march-in request.
Essential Inventions opposes USTR actions in the 301 process, because it is incorrectly used by the U.S. government to unilaterally change global intellectual property norms. TRIPS sets global norms for intellectual property protection. Other international instruments like the Doha Declaration and the World Health Organization’s Plan of Action should guide interpretation of the norms. Multilateral institutions like the WTO and WIPO exist to further develop international norms. The U.S. should work through these channels instead of acting unilaterally.
Special 301 should not be used to
- Define the meaning of TRIPS Article 27 requirements for patentability. (India and the Philippines were placed on last year’s 301 regarding this.)
- Promote data exclusivity. There are other TRIPS-compliant ways to meet TRIPS 39.3 requirement for data protection, including cost sharing models.
- Cite countries that have granted TRIPS-compliant compulsory licenses. The U.S. issues compulsory licenses (like the recent judicially granted eBay licenses), so we shouldn’t try to prevent other nations from doing the same.
McCoy asked Cox for more information on Essential Inventions. She said that it was created with the goal of distributing generics by applying for compulsory licenses for medicines. They’ve been involved in a number of compulsory licensing requests, including ritonavir and xalatan in the U.S., antiretrovirals in Cameroon, and a cancer drug for production Canada for export to Chile.
Rashmi Rangnath from Public Knowledge focused her testimony on Canada, which has been listed in recent Special 301 Reports, and is a clear example of country that’s laws and practices are similar to those in the US. Her comments were prepared with assistance from Canadian law professor Michael Geist.
Canada is a place where IP is protected and owners are able to make money. It is a member of multiple multilateral agreements on IP, including the Berne Convention and TRIPS. In some ways, Canada has stronger copyright protection than the U.S. (i.e.- concerning licensing).
Canadian law includes tough penalties, and courts have imposed them. Law enforcement carries out enforcement actions. Infringement rates have fallen, and operating revenue from theaters is up. Canada is 6th largest market for entertainment in world. Despite all of this, rightholders argue that Canada is a piracy haven.
Canadian consumers can access works on fair terms, but Canadian limitations and exceptions are narrower than our own. Expansion of these provisions would not jeopardize rightholders; Law reforms efforts in Canada would not lessen IP protection.
A Committee member from the Library of Congress asked Rangnath for Public Knowledge’s view on the Canadian copyright reform legislation, Bill C-11. Rangnath answered that PK does not have a position on bill, and they are not asking for modifications. It is a Canadian domestic issue. Our view regarding C-11 and the Special 301 review is that the bill doesn’t lessen IP protection for US rightholders.
Mike Elliot from the Chamber of Commerce’s Global Intellectual Property Center (GIPC) testified next. He noted that the Chamber represents 3 million businesses of all sizes, and he talked about how IP supports jobs and economic growth. He cited the figure that the IP industries are responsible for $1.7 trillion of GDP.
The GIPC written submission describes the IP landscape in eight countries, which they believe need stronger IP. He noted that there have been positive developments in some of the countries – China made its 2010 Special IPR Campaign permanent, and Russia has made progress on strengthening IP as part of its WTO accession. Still, much more needs to be done. Issues in many countries include failure to implement WIPO treaties, lack of DE, poor border powers.
Brooks Tueting, a law student from the University of Wyoming College of Law Center for International Human Rights Law and Advocacy testified next. He offered three suggestions for how the Special 301 Review could be conducted while showing greater respect for access to medicine:
- USTR should recognize the difference between drug patents and other types of IP by having a bifurcated review process. When drug patents are the subject of a potential Special 301 listing, USTR should consider its affect on public health. Medicines are different than things like DVDs.
- USTR should refrain from citing countries in the Special 301 Report for any medicine purchases that come from the Medicines Patent Pool. While the industry needs profits in rich countries to fund R&D, the pool should provide low cost drugs for the public sector in poor countries.
- USTR should harmonize its treatment of Thailand with other Pacific states.
McCoy asked Tueting to elaborate on the bifurcation of the review, and Tueting said there would be essentially two reviews. A Committee members from the Department of State asked Tueting if his point was that issues surrounding access to medicines have unique consequences, and he said it was.
Sean Flynn from American University Washington College of Law’s Program on Information Justice and Intellectual Property testified next. He expressed concern that no officials from the health agencies on the Special 301 Panel were present. A lot of the civil society groups who testify at the hearing are concerned with the public health implications of the Special 301, so the Committee should ask DHHS, USAID, and PEPFAR to attend in the future.
Flynn said that the Special 301 process qualifies as an “informal adjudication” by a government “agency” under the Administrative Procedures Act, and therefore it is bound by law to avoid “arbitrary and capricious” outcomes. Past Special 301 Reports have not met this requirement. Special 301 also violates the WTO commitment to multilateral dispute settlement, because listing in the Special 301 Report is a unilateral threat of sanctions. The Special 301 Report should address this, and if the Committee disagrees, it should explain why in the Report.
Complaints about pharmaceutical policies that affect market access but are unrelated to intellectual property should not be included in the Report. The definition of “market access” for the Special 301 is narrower than the definition in Section 301. To qualify for listing in the Special 301 Report, a pharmaceutical pricing policy must either violate an international agreement or be discriminatory. The Special 301 Report should address this, and if the Committee disagrees, it should explain why in the Report.
If the Special 301 Committee meets privately with industry groups, FOIA and federal Open Meetings Act apply. More generally, the public hates secrecy. The recent protests against SOPA, PIPA, and ACTA were driven by the secrecy surrounding IP negotiations.
McCoy told Flynn that Annex A of the last Special 301 Report describes how the process fits with WTO. Flynn replied that the description was inadequate. The Report should include the statement of administrative action stating that the U.S. will only sanction other countries through the WTO Dispute Settlement mechanism. The Committee should also state in the report that placement in the list is a threat, or explain why it is not a threat. The Report should include a section describing how the process works, and clarifying that only the WTO can determine what is TRIPS compliant.
James Love from Knowledge Ecology International, and the U.S. Chair of the Trans Atlantic Consumer Dialogue Working Group on Intellectual Property, was the next witness. He suggested changing the Special 301 from an annual review to a triennial review. This would give the Committee more time to carefully prepare the report, and more time for interested parties to offer constructive input.
Rightholder comments that cite employment and other statistics focus on a relatively small number of people who make money as performers, authors, etc. There is also a large amount of wealth created by industries that rely on flexible intellectual property, including much of the tech industries. No one really knows which industries generate more money and jobs.
On copyright issues, the IIPA submission mentions Canada right away. If there are real standards about identifying the countries with the worst IP policies, this makes no sense. It only makes sense from the point of view of IIPA lobbying.
The pharmaceutical industry raises a legitimate issue when it brings up the need to fund research and development for new drugs. But is raising prices everywhere really the way to do this? In the long run, making cancer drugs unaffordable for most people in the world will not fly. Regarding LDCs, USTR seems to be trying to force them to have pharmaceutical patents before they are obliged by TRIPS to have them. This is embarrassing. These countries are extremely poor and have huge problems with AIDS.
Part of the job of the committee is to incorporate the Doha Declaration. U.S. diplomacy in this area could be redirected. For instance, it could promote international obligations to fund R&D.
Michael Schlesinger of the International Intellectual Property Alliance (IIPA) noted that his organization is a coalition of trade associations that together represent over 3000 companies. This year, IIPA recommended 33 countries for the Priority Watch List, Watch List, or section 306 monitoring. His organization believes that Special 301 is important because is dismantles market access barriers and brings jobs to the U.S. He gave a list of the “Copyright industries Initiatives and Challenges for 2012:”
- The need for adequate laws and detternet enforcement responses to copyright piracy
- Internet piracy
- Enterprise (including government) end-user piracy of software and other copyright materials
- Unauthorized loading onto PCs and mobile devices
- Circumvention of Technological Protection measures
- Illegal camcording of theatrical motion pictures
- Piracy of books and journals
- Optical disc and game cartridge piracy
- Pay TV piracy and signal theft
- Using FTAs to improve global standards of copyright protection and enforcement
- Market access barriers
McCoy asked Schlesinger to discuss the IP landscapes in Saudi Arabia and Spain. Schlesinger said that Saudi Arabia had previously promised to increase IP enforcement and provide deterrent penalties for piracy, but it has not done so. There is also no transparency in Saudi Arabia.
The IIPA recognizes Spain just passed its new law for online enforcement, which was a “courageous” thing to do. He noted that Spain had a developed creative market in the recent past, but its markets had been decimated by online piracy.
The hearing closed. Paula Pinha from USTR announced that USTR is accepting further comments, and the docket is open until March 1. Post hearing comments should be submitted through the online portal at regulations.gov (enter “ustr-2011-0021” in the search field to get to the submission form).
