Updated March 13 2019 Intellectual Property Rights IPR and International Trade Background What is intellectual property IP and how is it protected IP is a creation of the mind embodied in physical and digital objects Intellectual property rights IPR are legal private enforceable rights that governments grant to inventors and artists IPR generally provide timelimited monopolies to right holders to use commercialize and market their creations and to prevent others from doing the same without their permission acts referred to as infringements IPR are intended to encourage innovation and creative output After these rights expire other inventors artists and society at large can build on them What is the extent of IPR infringement IPR infringement is difficult to quantify given its illicit nature although some estimates of trade in counterfeit and pirated goods are in the hundreds of billions of dollars per year worldwide Innovation can be costly and time-consuming but IPR infringement often has relatively low risk and potentially high profit The digital environment heightens such challenges In a 2012 International Trade Commission survey about 10% of digitally intensive U S firms reported experiencing at least one “cyber incident” harming their network data systems’ confidentiality integrity or availability In FY2017 U S Customs and Border Protection reported seizing $1 2 billion of IPR-infringing goods at U S borders with China the largest source Trade Policy Tools for IPR Examples of IPR Patents protect new innovations and inventions such as pharmaceutical products chemical processes new business technologies and computer software Copyrights protect artistic and literary works such as books music and movies Trademarks protect distinctive commercial names marks and symbols Trade secrets protect confidential business information that is commercially valuable because it is secret including formulas manufacturing techniques and customer lists Geographical indications GIs protect distinctive products from a certain region applying primarily to agricultural products What is the congressional interest The congressional role in IPR and international trade stems from the U S Constitution Congress has legislative oversight and appropriations responsibilities in addressing IPR and trade policy Since 1988 Congress has included IPR as a principal trade negotiating objective in trade promotion authority TPA The context for congressional interest may include policy concerns such as the role of IPR in the U S economy the impact of IPR infringement on U S commercial health safety and security interests and the balance between protecting IPR to stimulate innovation and advancing other public policy goals What is IP’s role in the U S economy IP is considered important to U S economic growth and a comparative advantage internationally A range of U S industry relies on IPR protection A subset of the most IP-intensive industries were estimated to account for approximately 30% of U S direct employment and 52% of U S merchandise exports and in 2012 about 12 3% of U S private services exports 2014 Department of Commerce data released in 2016 Yet lawful limitations to IPR such as “fair use” copyright exceptions for media research and teaching may also add value How are IPR and international trade related Goods and services traded are increasingly IPR-related Developed countries traditionally have been the source of IP see Figure 1 but emerging markets also are becoming innovation centers The use of trade policy to advance IPR internationally emerged with the North American Free Trade Agreement NAFTA and World Trade Organization WTO 1995 Agreement on Trade-Related Aspects of Intellectual Property Rights TRIPS Agreement These agreements build on IPR treaties dating to the 1800s administered by the World Intellectual Property Organization WIPO “To promote the Progress of Science and useful Arts by securing for limited Times to Authors and Inventors exclusive Right to their respective Writings and Discoveries” and “To regulate Commerce with foreign Nations” - U S Constitution Article 1 Section 8 stipulating powers of Congress What is the WTO TRIPS Agreement The TRIPS Agreement sets minimum standards of protection and enforcement for IPR It includes provisions on  WTO nondiscrimination principles  application of the WTO’s binding dispute settlement   mechanism for IPR disputes a balance of rights and obligations between protecting private right holders and securing broader public benefits and flexibilities for developing countries in implementation and for pharmaceutical patent obligations—extended in November 2015 for least developed countries LDCs until January 2033 or until they are no longer LDCs whichever is earlier The 2001 WTO “Doha Declaration” committed members to interpret TRIPS to support public health and access to medicines https crsreports congress gov Intellectual Property Rights IPR and International Trade Figure 1 IPR Trade for Selected Countries 2017 billions of U S dollars The United States may seek to negotiate IPR provisions in the proposed bilateral talks with Japan the European Union EU and depending on the outcome of Brexit the United Kingdom While these countries have generally comparable IPR standards the United States has potential issues with each For example U S negotiators may seek to address the differing U S and EU approaches on GIs and trademarks In addition all three potential partners may seek to address trade secret theft What are other trade policy tools to support IPR  The “Special 301” report by the Office of the U S Trade  Source WTO 2017 data in 2018 statistical review Note Charges for use of IP include proprietary rights and licenses What are U S IPR trade negotiating objectives Since the advent of TRIPS in 1995 U S IPR trade negotiating objectives have been to ensure that U S FTAs “reflect a standard of protection similar to that found in U S law” “TRIPS-plus” and to apply existing IPR protection to digital media through adherence to the WIPO “Internet Treaties ” These objectives have evolved through Trade Promotion Authority TPA renewed in June 2015 P L 114-26 The 2015 TPA largely incorporates the 2002 TPA’s IPR objectives as well as includes new objectives on addressing cyber theft and protecting trade secrets and proprietary information While the 2015 TPA has an objective of ensuring that agreements negotiated “foster innovation and access to medicines ” it does not specifically include the pharmaceutical provisions of the so-called May 10 2007 Understanding which modified in part patent provisions to enhance access to medicines in then-pending U S FTAs with Peru Panama and Colombia What IPR issues are on the U S trade negotiating agenda The United States has 14 FTAs with 20 countries in force with protections that exceed TRIPS In January 2017 President Donald Trump announced his intent to withdraw from the Trans-Pacific Partnership TPP signed in February 2016 upon taking office which would have achieved a higher level WTO-plus of IPR commitments Similar provisions are in the proposed United StatesMexico-Canada USMCA trade agreement such as  pharmaceutical patent protections with measures to protect public health consistent with TRIPS  data exclusivity periods for biologics—USMCA provides a    10-year period less than the 12 years granted in U S law higher than the TPP copyright protections penalties for circumventing technological protection measures online intermediary liability limitations “safe harbor” and “fair use” goals enhanced trademark protection and disciplines for GIs with measures to ensure that widely used geographic terms are available for generic use and enforcement through civil criminal and border measures including new criminal penalties for trade secret cyber theft clarification that criminal penalties apply to infringement in the digital environment and ex officio authority for customs agents to seize counterfeit and pirated goods  Representative pursuant to the Trade Act of 1974 as amended identifies countries with inadequate IPR regimes on “watch lists ” Trade secret theft including through cybercrime is a growing focus Section 337 of the amended Tariff Act of 1930 authorizes the International Trade Commission ITC to prohibit U S imports that infringe on U S IPR Section 337 cases have been largely patent-focused Under U S trade preference programs such as the Generalized System of Preferences GSP the United States may consider a developing country’s IPR policies and practices as a basis for offering or suspending duty-free entry to certain products from the country Issues for Congress Why are IPR trade issues actively debated U S trade policy promotes IPR Yet IPR and trade issues involve a range of stakeholder interests Some view IPR as beneficial to countries of all economic levels while others argue that stringent IPR policies may limit economic growth in less advanced countries IPR provisions in the proposed USMCA and other trade negotiations can spark debate on the role of patents and data exclusivity in incentivizing innovations and supporting affordable access to medicines As digital trade grows copyright issues intersect with debates about ISP liability cross-border data flows data privacy and cyber theft of trade secrets which the United States has sought to incorporate its latest trade agreements How effectively are IPR commitments enforced The Trump Administration is committed to strengthening enforcement of existing IPR obligations For example the Administration imposed Section 301 tariffs on China in part due to China’s lack of respect for IPR and forced technology transfer obligations Congress may consider whether this is an effective strategy to address IPR issues How should the United States address IPR issues with emerging economies Emerging economies such as China India and Brazil present significant IPR concerns For example the Administration has used Section 301 measures to address China’s IPR practices In other emerging markets the United States has sought bilateral and multilateral engagement to revise TRIPS other trade policy tools e g bilateral investment treaty negotiations Special 301 to further encourage IPR-related reforms and greater trade enforcement in the WTO See CRS Report RL34292 Intellectual Property Rights and International Trade Shayerah Ilias Akhtar Specialist in International Trade and Finance Ian F Fergusson Specialist in International Trade and Finance https crsreports congress gov Intellectual Property Rights IPR and International Trade IF10033 Disclaimer This document was prepared by the Congressional Research Service CRS CRS serves as nonpartisan shared staff to congressional committees and Members of Congress It operates solely at the behest of and under the direction of Congress Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has been provided by CRS to Members of Congress in connection with CRS’s institutional role CRS Reports as a work of the United States Government are not subject to copyright protection in the United States Any CRS Report may be reproduced and distributed in its entirety without permission from CRS However as a CRS Report may include copyrighted images or material from a third party you may need to obtain the permission of the copyright holder if you wish to copy or otherwise use copyrighted material https crsreports congress gov IF10033 · VERSION 13 · UPDATED