Intellectual Property Rights and International Trade Updated May 12 2020 Congressional Research Service https crsreports congress gov RL34292 Intellectual Property Rights and International Trade Summary This report provides background on intellectual property rights IPR and discusses the role of U S international trade policy in enhancing IPR protection and enforcement abroad IPR are legal rights granted by governments to encourage innovation and creative output by ensuring that creators reap the benefits of their inventions or works They may take forms such as patents trade secrets copyrights trademarks or geographical indications GIs Congress has constitutional responsibility for legislating and overseeing IPR and international trade policy Responsibility for developing IPR policy engaging in IPR-related international negotiations and enforcing IPR laws cuts across multiple U S government agencies The protection and enforcement of IPR is an important and long-standing component of U S international trade policy and U S trade negotiating objectives U S trade policy also seeks to address new and evolving issues in the IPR landscape related to the growing role of emerging markets in the global marketplace and the development of new technologies including related to digital trade Since the North American Free Trade Agreement NAFTA and the 1995 World Trade Organization WTO Agreement on Trade-Related Aspects of Intellectual Property Rights TRIPS Agreement trade policy has been used to advance IPR rules internationally The TRIPS Agreement set minimum standards for IPR protection and enforcement The United States engages in efforts with other trading partners to build on the TRIPS Agreement particularly through the negotiation of regional and bilateral free trade agreements FTAs Since 1988 Congress has included IPR as a principal trade negotiating objective for trade agreements in trade promotion authority TPA The specific negotiating objectives on IPR including in the most recent renewal of TPA in the Bipartisan Trade Promotion and Accountability Act P L 114-26 seek to negotiate TRIPS-plus provisions in U S FTAs To date the United States has entered into 14 FTAs with 20 countries which generally include IPR commitments exceeding obligations under the TRIPS Agreement “TRIPS-plus” IPR issues were prominent in the U S renegotiation of the NAFTA that culminated in the U S -Mexico-Canada Trade Agreement USMCA They also may surface in other U S trade liberalization or free trade agreement negotiations such as with the European Union EU and the United Kingdom UK which may depend on the outcome of UK-EU negotiations on their post-Brexit trade relationship Other trade policy tools also are available to advance U S international IPR objectives under various U S statutory authorities known as Special 301 Section 301 Section 337 and preference programs such as the Generalized System of Preferences In legislating on and monitoring IPR issues related to international trade policy Congress may     examine the role of IPR in U S trade policy including the implications of IPR trade negotiating objectives in Trade Promotion Authority conduct oversight of implementation of the IPR commitments in existing trade agreements as well as U S trade negotiations with the EU and the UK conduct oversight of the role of IPR in U S economic growth and innovation and how the protection and enforcement of IPR relates to other public policy goals such as access to medicines in poor or developing countries and crossborder data flows consider additional policy options to address IPR concerns in emerging economies that are not a part of existing U S FTAs or included in current U S FTA negotiations This may also include new and evolving IPR issues such as Congressional Research Service Intellectual Property Rights and International Trade  China’s industrial policies that promote indigenous innovation through IP theft forced localization and technology transfer policies forced localization barriers to trade and trade secret theft through cybercrime and examine the effectiveness of the current U S coordinating structure and the adequacy of current federal resources for promoting international IPR support Congressional Research Service Intellectual Property Rights and International Trade Contents IPR Definitions 1 Types of IPR 1 Patents 1 Trade Secrets 2 Copyright 2 Trademarks 3 Theft of Intellectual Property 3 Infringement 3 Piracy 3 Counterfeiting 4 Trade Secret Theft 4 Cybertheft 4 Innovation Indicators 4 Role of IP in U S Economy and Trade 6 Overall Role 6 Royalty and Licensing Charges 7 Specific U S Industries 7 “Fair Use” Industries 8 Quantifying IPR Infringement 9 Limitations on Data Estimating IPR Infringement Costs 9 International Economic Effects 11 U S Economic Effects 12 Customs Seizure Data 12 Overall U S Estimates 14 The Organizational Structure of IPR Protection 15 Multilateral IPR System 16 World Trade Organization WTO 16 Doha Declaration on the TRIPS Agreement and Public Health 18 World Intellectual Property Organization WIPO 20 U S Trade Law 21 Special 301 21 Section 301 23 Section 337 23 Generalized System of Preferences 25 U S Trade Promotion Authority and Negotiating Objectives 27 2002 Trade Promotion Authority 27 May 10 2007 Bipartisan Trade Agreement 27 2015 Trade Promotion Authority 28 Free Trade Agreements and Negotiations under the Trump Administration 29 United States-Mexico-Canada Agreement USMCA 29 Ongoing and Future Free Trade Agreement Negotiations 30 Core Provisions in U S Trade Agreements 31 Patents 31 Copyright 39 Trade Secrets 40 Trademarks 41 Congressional Research Service Intellectual Property Rights and International Trade Geographical Indications GIs 43 New and Evolving Issues 45 Issues for Congress 47 U S Efforts to Promote IPR Through Trade Policy 47 Enforcement of IPR Commitments 48 Effectiveness of the U S IPR Organizational Structure 49 Looking Forward 50 Office of the United States Trade Representative USTR 51 Department of Commerce Commerce 51 Department of Justice DOJ 52 Department of Homeland Security DHS 52 Department of Health and Human Services 53 Library of Congress 53 Department of State 54 U S Agency for International Development AID 54 United States International Trade Commission ITC 54 Coordinating and Advisory Bodies 54 Figures Figure 1 Patent filings through PCT 2015-2019 5 Figure 2 U S Trade in Services Royalties and License Fees from Intellectual Property Use 2013-2018 7 Figure 3 Overview of IPR Seizures by CBP 13 Figure 4 IPR Seizures at U S Borders Composition of Commodities FY2018 14 Figure 5 Different Scenarios for Data Exclusivity and Patent Protection 38 Tables Table 1 Estimated International Economic Losses Due to Counterfeiting and Piracy Selected Years 12 Table 2 IPR Seizures at U S Borders Source Economies FY2018 13 Table 3 USTR 2020 Special 301 Report Country Designations 22 Table 4 IPR-Related U S Government Agencies and Coordinating Bodies 26 Appendixes Appendix A Overview of IPR-Related U S Government Agencies and Coordinating Bodies 51 Contacts Author Information 56 Congressional Research Service Intellectual Property Rights and International Trade Introduction Individual nation states have developed intellectual property rights IPR regimes reflecting their domestic needs and priorities although the United States and other countries have acceded to several IP-related conventions and treaties since the 1800s Over time IPR protection and enforcement have come to the forefront as a key international trade issue for the United States— largely due to the role of intellectual property in an innovative U S economy and as a U S competitive advantage—and figure prominently in the multilateral trade policy arena and in regional and bilateral U S free trade agreements FTAs Congress has legislative oversight and appropriations responsibilities related to IPR and trade policy more generally This role of Congress stems from the U S Constitution which provides Congress with the power to “promote the Progress of Science and useful Arts by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries” and to “regulate Commerce with foreign Nations ”1 Since 1988 Congress has included IPR as a principal U S trade negotiating objective and has passed laws such as “Special 301” to advance protection and enforcement of U S IPR in global markets 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 the effect of foreign indigenous innovation and localization requirement on U S IPR and the balance or relationship between protecting IPR to stimulate innovation and advancing other public policy goals This report discusses the different types of IPR and IPR infringement the role of IPR in the U S economy estimated losses associated with IPR infringement the organizational structure of IPR protection U S trade policy and issues for Congress regarding IPR and international trade IPR Definitions Types of IPR IPR are legal rights granted by governments to encourage innovation and creative output They ensure that creators reap the benefits of their inventions or works They take a variety of forms such as patents trade secrets copyrights trademarks or geographical indications Through IPR governments grant a temporary legal monopoly to innovators by giving them the right to limit or control the use of their creations by others IPR may be traded or licensed to others usually in return for fees and or royalty payments Although the World Trade Organization WTO Agreement on Trade-Related Aspects of Intellectual Property Rights TRIPS Agreement provides minimum standards for IPR protections such rights are granted on a national basis and are in general enforceable only in the country in which they are granted However WTO members are obligated to abide by WTO rules and their IPR enforcement practices can be challenged by other WTO members through the WTO dispute settlement process Patents The Patent Act Title 35 of the United States Code governs the issuance and use of patents in the United States Patents are granted for inventions of new products and processes known as utility patents Patents also may be granted for new designs and plant varieties For an invention to be 1 U S Constitution Article 1 Section 8 Congressional Research Service 1 Intellectual Property Rights and International Trade patentable it must be new and “non-obvious” involving an inventive step and have a potential industrial or commercial application The patent provides the holder with the exclusive right to exclude others from making using selling or importing into the United States the patented invention for a period of 20 years 2 The patent right is based on the proposition that granting inventors a temporary monopoly over their invention will encourage innovation and promote the expenditure of money on research and development R D The temporary monopoly may allow a patent holder to recoup these up-front costs by charging higher prices for the patented invention In return for this economic rent the patent holder must disclose the content of the invention to the public along with test data and other information concerning the invention This is meant to spur further creativity by those seeking to build on the patent after its expiration Domestically patents are granted by the U S Patent and Trademark Office PTO of the Department of Commerce Trade Secrets Any type of valuable information including a “formula pattern compilation program device method technique or process ” may be kept by its owner as a trade secret To be a trade secret the information must derive independent economic value from not being generally known or readily ascertainable by others and be subject to reasonable efforts by the owner to maintain its secrecy 3 Examples of trade secrets include blueprints customer lists pricing information and source code While protection of patents and copyright is an exclusive matter of federal law trade secret protection is found not only in federal law but also in state law Most states have adopted the Uniform Trade Secret Act UTSA a model law drafted by the National Conference of Commissioners on Uniform State Laws There are important differences between trade secrets and patents Individuals do not have to apply for trade secret protection as they would for patents Protection of trade secrets originates immediately with the creation of the trade secret there is no process for applying for protection or registering trade secrets Trade secret protection does not expire unless the trade secret becomes generally known In contrast patent applicants must disclose information about their innovation to the PTO in order to acquire a patent The scope of protection is also different patents preclude almost all uses of the invention by others whereas trade secret law only prevents acquisition or misappropriation of a trade secret by improper means such as theft Patents thus offer right holders stronger protection but for a limited period of time While applying for a patent can be a costly and lengthy process patents are valuable if the confidentiality of the innovation is fragile e g if the invention is easily reversed engineered or if the area of research is highly competitive Copyright Protection of copyrights in the United States is based on the Copyright Act Title 17 of the United States Code Copyrights protect original expressions of authorship fixed in physical and or digital forms Such protections include literary or artistic works such as books music sound recordings movies paintings architectural works and computer code and in some cases databases Traditionally copyrights differed from patents in that there was no claim to industrial applicability or novelty of the idea The expression of the idea—the particular way it was conveyed in words images or sounds—and not the idea itself was being copyrighted While some of the criteria for copyrights differ from those of patents the objective is the same 2 In some cases the effective duration of patent protection can be shorter for example because of regulatory delays in the approval of the patent or delays in obtaining marketing approval for the patented invention 3 Uniform Trade Secret Act §1 4 Congressional Research Service 2 Intellectual Property Rights and International Trade furthering creativity by promoting investments of time money and effort to create works of cultural social and economic significance U S law provides copyright protection for life of the author plus 70 years for personal works or 120 years from creation or 95 years from publication for corporate works Copyrights may be registered by the U S Copyright Office of the Library of Congress although protection arises immediately upon fixation in a tangible medium of expression Trademarks Trademark protection in the United States is governed jointly by state and federal law The main federal statute is the Lanham Act of 1946 Title 15 of the United States Code Trademarks permit the seller to use a distinctive word name symbol or device to identify and market a product or company Marks can also be used to denote services from a particularly company The trademark allows quick identification of the source of a product and for good or ill can become an indicator of a product’s quality If for good the trademark can be valuable by conveying an instant assurance of quality to consumers Trademark law serves to prevent other companies with similar merchandise from free-riding on the association of quality with the trademarked item Thus a trademarked good may command a premium in the marketplace because of its reputation To be eligible for a trademark the words or symbol used by the business must be sufficiently distinctive generic names of commodities for example cannot be trademarked Trademark rights are acquired through use or through registration with the PTO A related concept to trademarks is geographical indications GIs which are also protected by the Lanham Act The GI acts to protect the quality and reputation of a distinctive product originating in a certain region however the benefit does not accrue to a sole producer but rather the producers of a product originating from a particular region GIs are generally sought for agricultural products or wines and spirits Protection for GIs is acquired in the United States by registration with the PTO through a process similar to trademark registration Theft of Intellectual Property Infringement IPR infringement is the misappropriation or violation of the IPR In the case of patents infringement of a patent owner’s exclusive rights involves a third party’s unauthorized use sale or importation of the patented invention Copyright infringement occurs when a third party engages in reproducing performing or distributing a copyrighted work without the consent of the copyright owner The greatest challenge to the patent right in the context of international trade is infringement in foreign countries or non-observance by WTO member states of the minimum standards of the TRIPS Agreement In addition to the term infringement other terms are used to describe certain violations of IPR Piracy The term “piracy” generally refers to copyrights and generally refers to widespread intentional infringement The major challenge facing copyright protection is piracy either through physical duplication of the work illegal dissemination of copyrighted material such as computer software music or movies over the internet and or participation in commercial transactions of copyrighted materials without the consent of the copyright owner Piracy can also mean the registration or use of a famous foreign trademark that is not registered in the country or is invalid because the trademark has not been used Congressional Research Service 3 Intellectual Property Rights and International Trade Counterfeiting An imitation of a product is referred to as a “counterfeit” or a “fake ” Counterfeit products are manufactured marketed and distributed with the appearance of being the genuine good and originating from the genuine manufacturer 4 The purpose of counterfeit goods is to deceive consumers about their origin and nature harming both the trademark owner and consumers Counterfeiting and copying of original goods are major challenges for trademarked products The counterfeited product can be sold for a premium because of its association with the original item while reducing the sales of the original items Consumer experience with a counterfeited good of inferior quality can damage the reputation of the trademark product Additionally counterfeited goods of inferior quality may be potentially harmful to health and safety Popular examples of counterfeit products include fake fashionwear e g counterfeits of brand-name bags and watches or fake pharmaceutical products e g counterfeits of brand-name prescription medicines Trade Secret Theft Misappropriation of trade secrets is a civil violation under federal and state laws Theft of trade secrets may also be a federal crime in some circumstances Industrial espionage refers to the stealing of trade secret information that relates to a product in interstate or foreign commerce to the economic benefit of third parties and to the injury of the trade secret owner 18 U S C 1832 Economic espionage refers to the stealing of a trade secret when the intent to benefit a foreign power 18 U S C 1831 5 Trade secret theft can occur through cyber means see below 6 Cybertheft Criminal activity including IP theft increasingly occurs in the online environment Internetrelated crimes are often referred to as cybercrime though no one definition appears to exist for it within the U S government 7 One of type of cybercrime is cybertheft which broadly may be defined as crimes in which a computer is used to steal money or other things of value and can include “embezzlement fraud theft of intellectual property and theft of personal and financial data ”8 Other terms that may encompass internet-related IPR theft include cyber intrusions and cyberattacks Innovation Indicators According to the Organization for Economic Co-operation and Development OECD innovation is the “implementation of a new or significantly improved product good or service or process a new marketing method or a new organizational method ” Possible innovation-related indicators include activities concerning commercializing inventions and new technologies 9 Trends in the 4 Counterfeit goods should be distinguished from generic goods i e in the case of generic forms of pharmaceutical medicines 5 See CRS Report R42681 Stealing Trade Secrets and Economic Espionage An Overview of the Economic Espionage Act by Charles Doyle For more information see CRS Report R43714 Protection of Trade Secrets Overview of Current Law and Legislation by Brian T Yeh 6 USTR 2015 Special 301 Report April 2015 p 20 7 CRS Report R42547 Cybercrime Conceptual Issues for Congress and U S Law Enforcement by Kristin Finklea and Catherine A Theohary 8 Office of Justice Programs Bureau of Justice Statistics “Cybercrime ” 9 National Science Board NSB Science and Engineering Indicators 2015 pp 6-39 – 6-49 Congressional Research Service 4 Intellectual Property Rights and International Trade total number of patent applications under the Patent Cooperation Treaty PCT an international patent filing system administered by the World Intellectual Property Organization WIPO may be illustrative see Figure 1 10 The United States remains the source of the world’s largest number of PCT filing applications followed by China and Japan together these three countries accounted for almost 64% of all PCT applications filed in 2019 China overtook the European Union EU and Japan in 2017 11 While China has become a top patent filer the number of patents quantity does not necessarily reflect leadership in patent quality and innovativeness 12 The top fields of technology in PCT filings were digital communication computer technology audio-visual technology electrical machinery apparatus energy and optics 13 Figure 1 Patent filings through PCT 2015-2019 By country where application originated Source CRS analysis based on data from WIPO IP Statistics Data Center Notes Annual data is based on patent applications’ filing date “Patenting is an intermediate step toward innovation and patent data provide indirect and partial indicators of innovation Not all inventions are patented and the propensity to patent differs by industry and technology Not all patents are of equal value and not all foster innovation—patents may be obtained to block rivals negotiate with competitors help in infringement lawsuits ” W Cohen R Nelson and J Walsh “Protecting Their Intellectual Assets Appropriability Conditions and Why U S Manufacturing Firms Patent or Not ” National Bureau of Economic Research NBER Working Paper No 7552 2000 cited in NSB Science and Engineering Indicators 2015 p 6-40 11 The European Union represented in the data is the EU-27 reflecting the departure of the United Kingdom from the EU 12 Ana Maria Santacreu and Heting Zhu What Does China’s Rise in Patents Mean A Look at Quality vs Quantity May 2018 https research stlouisfed org publications economic-synopses 2018 05 04 what-does-chinas-rise-inpatents-mean-a-look-at-quality-vs-quantity 13 WIPO “PCT publications by technology ” WIPO IP Statistics Data Center Retrieved March 9 2020 10 Congressional Research Service 5 Intellectual Property Rights and International Trade Role of IP in U S Economy and Trade Intellectual property generally is viewed as a long-standing strategic driver of U S productivity economic growth employment higher wages and exports It also is considered a key source of U S comparative advantage such as in innovation and high-technology products Nearly every industry depends on it for its businesses Industries that rely on patent protection include the aerospace automotive computer consumer electronics pharmaceutical and semiconductor industries Copyright-reliant industries include the software data processing motion picture publishing and recording industries Trademarks and trade secrets are widely used in most industries but certain industries are especially trademark-intensive including the apparel pharmaceuticals and electronics industries 14 Other industries that directly or indirectly benefit from IPR protection include retailers traders and transportation businesses which support the distribution of goods and services derived from intellectual property 15 Overall Role IP-intensive industries play a major role in the U S economy and international trade What follows are some findings from a 2016 study by the U S Department of Commerce 16  U S economic impact In 2014 a subset of the most intellectual propertyintensive industries directly supported 27 9 million jobs in the United States or about 18% of total U S employment They also indirectly supported 17 6 million U S jobs via the supply chain in other industries In 2014 the wages of employees working in IP-intensive industries tended to be about 46% higher on average than those working in non-IP-intensive industries These industries accounted for about $6 6 trillion in value added to the U S economy more than one-third of the U S gross domestic product GDP  U S trade in goods In 2014 IP-related merchandise exports amounted to $842 billion 52% of total U S merchandise exports while IP-related merchandise imports reached $1 391 billion about 70% of total U S merchandise imports Key sectors for IP-intensive merchandise exports include semiconductor and electric parts basic chemicals pharmaceuticals and medicine measuring and medical instrument and computer and peripheral equipment 17 U S trade in services In 2012 exports of services by IP-intensive industries totaled about $81 billion about 12% of total U S private services exports Key sources of services exports included the software publishing financial services computer systems design and related services motion picture and video and management and technical consulting industries The study did not provide information on imports of services by IP-intensive industries though it should be  14 Department of Commerce Intellectual Property and the U S Economy 2016 Update September 2016 https www uspto gov sites default files documents IPandtheUSEconomySept2016 pdf 15 Stephen E Siwek “Engines of Growth Economic Contributions of the US Intellectual Property Industries ” commissioned by NBC Universal 2005 p 2 16 Department of Commerce Intellectual Property and the U S Economy 2016 Update September 2016 https www uspto gov sites default files documents IPandtheUSEconomySept2016 pdf 17 Trade statistics may not capture the full importance of IP-intensive products to the U S economy as many IPintensive products are manufactured abroad as part of the global supply chain and the full value added of these products is not accounted for in trade statistics In addition services statistics are limited Congressional Research Service 6 Intellectual Property Rights and International Trade noted that the United States runs an overall surplus in international trade in services 18 Royalty and Licensing Charges The role of IP-intensive industries in U S trade in services includes charges for U S IP i e receipts exports and payments imports of royalties and licensing fees Rights holders may authorize the use of technologies trademarks and entertainment products that they own to entities in foreign countries resulting in revenues through royalties and license fees Between 2013 and 2018 U S receipts for use of royalties and licensing fees have remained relatively steady while there has been a slight increase in payments from U S firms to foreign firms In 2018 U S receipts from cross-border trade in royalties and license fees relating to patent trademark copyright and other intangible rights totaled $129 billion while U S payments of royalties and license fees to foreign countries amounted to $56 billion resulting in a trade surplus of $73 billion see Figure 2 Figure 2 U S Trade in Services Royalties and License Fees from Intellectual Property Use 2013-2018 billions of U S dollars Source BEA U S International Services data Specific U S Industries Industry-specific figures may further demonstrate the role of IP in the U S economy For example 18 CRS Report R43291 U S Trade in Services Trends and Policy Issues by Rachel F Fefer Congressional Research Service 7 Intellectual Property Rights and International Trade     Copyright industries According to a study commissioned by the International Intellectual Property Alliance IIPA in 2017 industries categorized as part of the “core” copyright industries e g computer software videogames books newspapers periodicals and journals motion pictures recorded music and radio and television broadcasting contributed about $1 3 trillion to the U S economy “value-added” to current GDP representing about 6 9% of the U S economy The study also estimated that the “core” copyright industries employed nearly 5 7 million workers in 2017 representing about 4% of the total U S workforce In addition the study estimated that foreign sales of certain U S copyright sectors totaled $191 2 billion in 2017 19 Pharmaceutical industry Between 1998 and 2019 employment in the industry grew 26% According to the Pharmaceutical Researchers and Manufacturers of America PhRMA in 2017 American biopharmaceutical companies supported more than 800 000 jobs in R D and more than 4 million jobs in total when accounting for indirect jobs vendors and suppliers and induced jobs additional private economic activity 20 According to PhRMA R D investment was about $97 billion in 2017 21 Manufacturing industry Based on data from a study by NDP Analytics a private-sector research firm IP-intensive manufacturing industries performed better than non-IP-intensive industries when comparing key economic measures R D investment wages exports value-added and gross output 22 For example in 2015 the study estimated that exports per employee for IP-intensive manufacturing industries averaged about $177 033 compared to about $63 778 on average for non-IP-intensive manufacturing industries 23 Software industry Software org an independent research organization reported that the software industry directly employs around 3 million workers and more than 14 million when accounting for indirect jobs in 2018 The report also stated that the industry directly contributed $845 billion in value-added to the U S GDP and invested almost $83 billion in R D 24 “Fair Use” Industries Some advocacy groups assert that empirical analysis of the role of IPR in the U S economy may not fully evaluate the economic and commercial benefits of lawful exceptions and limitations to exclusive rights—referred to broadly as “fair use ” The “fair use” doctrine provides limitations and exceptions to the exclusive rights afforded by copyright law It permits limited use of copyrighted works without requiring permission from the right holder in certain cases examples 19 Stephen E Siwek Copyright Industries in the U S Economy The 2018 Report Economists Incorporated Prepared for the International Intellectual Property Alliance IIPA 20 PhRMA 2019 Profile Biopharmaceutical Research Industry Washington DC July 2019 21 Ibid 22 Nam D Pham IP-Intensive Manufacturing Industries Driving U S Economic Growth NDP Analytics September 2017 23 Ibid p 21 24 Software org BSA Foundation Software Growing U S Jobs and the GDP 2019 https software org reports software-growing-us-jobs-and-the-gdp Congressional Research Service 8 Intellectual Property Rights and International Trade of which may include news reporting research teaching and library use 25 For example by one estimate in 2014 businesses that rely on “fair use” exceptions to U S copyright law generated total revenue of $5 6 trillion on average and $2 8 trillion on average of value-added 16% of total U S current dollar GDP 26 Additionally employment associated with “fair use” totaled around 18 million of U S employment in 2014 and U S exports associated with “fair use” totaled $368 billion in 2014 27 Quantifying IPR Infringement Advances in information and communications technology ICT and declining costs of transportation spurred by lower trade barriers have fundamentally changed information and trade flows Such changes have created new markets for U S exporters but at the same time have been associated with the proliferation of counterfeiting and piracy on a global scale Several factors contribute to the growing problem of IPR infringement While the costs and time for research and development are high most IPR infringement occurs with relatively low costs and risks and a high profit margin According to PhRMA it takes a pharmaceutical company over 10 years of R D on average to create a new drug with the average cost to develop a drug about $2 6 billion during the 2000s to early 2010s In 2017 the biopharmaceutical industry invested around $91 billion for research and development in the United States 28 In contrast drug counterfeiters can lower production costs by using inexpensive and perhaps dangerous or ineffective ingredient substitutes The development of technologies and products that can be easily duplicated such as recorded or digital media also has led to an increase in counterfeiting and piracy Increasing internet usage has contributed to the distribution of counterfeit and pirated products Additionally civil and criminal penalties often are not sufficient deterrents for piracy and counterfeiting The United States is especially concerned with foreign IPR infringement of U S intellectual property Compared to foreign countries IPR infringements levels in the United States are considered to be relatively low 29 Limitations on Data Estimating IPR Infringement Costs Quantification of the economic losses associated with IPR infringement has been a long-standing focus in the academic policy and industry literature Many experts agree that it is difficult to quantify the magnitude of IPR theft with any precision Reasons may include  Illicit nature of IPR infringement Because IPR infringement is illicit and secretive tools that are used to measure legitimate business activity cannot necessarily be used to measure economic losses from IPR infringement As such 25 Thomas Rogers and Andrew Zamosszegi Fair Use in the U S Economy Economic Contribution of Industries Relying on Fair Use 2011 Prepared for the Computer Communications Industry Association CCIA 2011 See also CRS Report RL33631 Copyright Licensing in Music Distribution Reproduction and Public Performance by Brian T Yeh 26 Thomas Rogers and Andrew Zamosszegi Fair Use in the U S Economy Economic Contribution of Industries Relying on Fair Use 2017 Prepared for CCIA 2017 p 3 27 Ibid p 7 28 PhRMA 2019 Profile Biopharmaceutical Research Industry Washington DC July 2019 29 For example see Global Intellectual Property Center GIPC U S Chamber of Commerce Measuring Momentum GIPC International IP Index First Edition December 2012 Congressional Research Service 9 Intellectual Property Rights and International Trade     it may be easier to quantify the positive contribution of copyright industries to the U S economy more precisely than to measure the losses to the U S economy from copyright piracy Quantifying specific components of economic impact The economic impact of IPR infringement depends on a range of factors including the different types of infringing goods being sold the rate at which consumers substitute buying infringing goods for legitimate goods and IPR infringement’s deterrent effect on R D and other investment It may be difficult to measure precisely these components of the economic impact of IPR infringement 30 Assumptions used to calculate economic impact Methods for calculating data on counterfeiting and piracy often involve certain assumptions Estimates of losses from IPR infringement can be highly sensitive to how these assumptions are derived and weighted The basic economic model employed in some IPR loss estimates assumes that there is substitutability between pirated and legitimate goods For example under this model sales of pirated goods may be equated to revenue losses of legitimate U S copyright businesses Some analysts suggest that legitimate firms face a competition threat only if the individuals purchasing IPR-infringing products would be able and willing to purchase the legitimate product at the price offered when IPR infringement is not present 31 For consumers in developing countries especially this assumption may not be tenable IPR infringement in the digital environment While IPR infringement in the past primarily constituted counterfeiting and piracy of physical goods such as CDs and books there has been a growing amount of piracy taking place through digital mediums such as illegal downloading and streaming of music movies and books over the internet The use of virtual private networks VPN also makes it harder to track down the original location of infringement It may be more complex to measure IPR infringement that takes place in the digital environment and in turn more difficult to measure the associated economic losses accurately Quantifying the economic cost of trade-secret theft may be hampered by the reluctance of companies to disclose such theft as well as difficulties assessing the monetary value of the secrets stolen U S trade losses due to copyright infringement may be higher than reported because estimates often do not account for all forms of piracy such as internet piracy One study estimates that nearly 24% of global internet traffic infringes on copyright 32 Sources of data Estimates on economic losses from IPR infringement come from a range of sources including academic policy and industry sources According to a U S Government Accountability Office GAO study the U S government does not systematically collect data or analyze the impacts of counterfeiting and piracy on the U S economy In many cases the federal government relies on estimates conducted by industry groups However companies may be reluctant to disclose their IPR losses because of possible 30 National Intellectual Property Rights Coordination Center IPR Center Intellectual Property Rights Violations A Report on Threats to United States Interests at Home and Abroad November 2011 31 Robert G Picard “A Note on Economic Losses Due to Theft Infringement and Piracy of Protected Works ” Journal of Media Economics 17 3 207-217 2004 32 Envisional Technical Report An Estimate of Infringing Use of the Internet January 2011 Congressional Research Service 10 Intellectual Property Rights and International Trade reputational and commercial risks and industry associations may not always release their proprietary data sources and methods complicating efforts to verify such estimates 33 International Economic Effects While assessments of the overall global economic costs of infringement on copyrights trademarks and patents are limited available evidence indicates that the adverse economic effects of global IPR infringement stand in the hundreds of billions of dollars and are increasing Customs data on seizures of counterfeit and pirated goods may offer some idea of the magnitudes involved in terms of impact on producers and exporters A 2019 study jointly conducted by the Organization for Economic Cooperation and Development and the EU Intellectual Property Office EUIPO examined international trade in counterfeit goods using customs seizure data for 2014 through 2016 34 The OECD EUIPO study estimated that the value of international trade in counterfeit and pirated goods was as much as $509 billion equivalent to 3 3% of world trade in 2016 up from the estimated $461 billion 2 5% of world trade in 2013 according to a 2016 joint OECD-EUIPO study 35 The study also noted the industries impacted by IP infringement increased when compared to a previous study products seized by customs between 2014 and 2016 covered 92% of Harmonized System HS chapters compared to 80% for the 2011 to 2013 period 36 OECD noted the significant increase in the use of small parcels as the form of delivery which presents more challenges for customs officials to detect counterfeit and pirated goods According to a 2017 OECD study that estimated trade of counterfeit and pirated information and community technology ICT goods fake ICT goods accounted for up to 6 5% of total ICT trade and almost 43% of seized goods infringed the IP rights of U S firms 37 Counterfeit ICT goods may be consumer electronics communication equipment and electronic components Building on the 2016 OECD-EUIPO work is a study commissioned by the Business Action to Stop Counterfeiting and Piracy BASCAP a business initiative organized by the International Chamber of Commerce According to BASCAP the total value of counterfeit and pirated products was an estimated $923 billion to $1 1 trillion in 2013 and is projected to reach $1 9 to $2 8 trillion in 2022 see Table 1 38 33 U S Government Accountability Office GAO Intellectual Property Observations on Efforts to Quantify the Economic Effects of Counterfeit and Pirated Goods GAO-10-423 April 2010 and Commission on the Theft of American Intellectual Property The IP Commission Report 34 Organization for Economic Cooperation and Development OECD and European Union Intellectual Property Office EUIPO Trends in Trade in Counterfeit and Pirated Goods 2019 35 OECD and EUIPO Trade in Counterfeit and Pirated Goods Mapping the Economic Impact 2016 36 The Harmonized System HS is an international commodity classification system that the World Customs Organization WCO developed and maintains 37 OECD Trade in Counterfeit ICT Goods March 2017 38 Frontier Economics The Economic Impacts of Counterfeiting and Piracy A Report Commissioned by Business Action to Stop Counterfeiting and Piracy BASCAP February 2017 Congressional Research Service 11 Intellectual Property Rights and International Trade Table 1 Estimated International Economic Losses Due to Counterfeiting and Piracy Selected Years billions of U S dollars Category 2013 2022 Internationally traded counterfeit and pirated products $461 $991 Domestically produced and consumed counterfeit and pirated products $249-456 $524-959 $213 $384-856 $923-1 130 $1 900-2 810 Digitally pirated products Total Source Frontier Economics The Economic Impacts of Counterfeiting and Piracy A Report Commissioned by Business Action to Stop Counterfeiting and Piracy BASCAP February 2017 Notes BASCAP economic loss estimates are restricted to the 35 OECD member countries U S Economic Effects While specific estimates vary the available data suggest that U S economic losses from IPR infringement are significant Customs Seizure Data Data on pirated and counterfeit seizures of imports at U S borders by the Department of Homeland Security DHS shed light on the magnitude of the issue in the U S context In FY2018 the number of IPR seizures at the U S border totaled 33 810 commodities shipped by express mail cargo and other ways valued at $1 4 billion manufacturer’s suggested retail price MSRP 39 The total number of seizures per year has been increasing while the estimated value remained relatively constant since 2014 Figure 3 Manufacturer’s suggested retail price MSRP is the price of goods had they been legal U S Department of Homeland Security Intellectual Property Rights Seizure Statistics Fiscal Year 2018 39 Congressional Research Service 12 Intellectual Property Rights and International Trade Figure 3 Overview of IPR Seizures by CBP FY2010-FY2018 Source U S Customs and Border Protection IPR annual seizure statistics China and Hong Kong ranked as the two largest source economies for seizures by value see Table 2 The commodities seized were diverse with watches jewelry and handbags wallets being the top two types seized Goods seized in FY2018 included shipments of circumvention devices that violated the Digital Millennium Copyright Act DMCA P L 105-304 Customs data may be limited in that they do not reflect digital-based IPR infringement Table 2 IPR Seizures at U S Borders Source Economies FY2018 Estimated MSRP millions of U S dollars U S Trading Partner Estimated MSRP % of Total Total $1 399 9 100% China $761 1 54 0% Hong Kong $440 3 31 0% India $20 0 1 0% Korea $10 1 0 7% Canada $7 8 0 6% Turkey $5 8 0 4% Vietnam $5 2 0 4% Taiwan $5 0 0 4% Malaysia $4 7 0 3% Pakistan $2 8 0 2% $137 1 10% All Others Congressional Research Service 13 Intellectual Property Rights and International Trade Source CRS analysis of data from Department of Homeland Security “Intellectual Property Rights Seizure Statistics Fiscal Year 2018 ” Notes Based on manufacturer’s suggested retail price MSRP of goods had they been genuine Figure 4 IPR Seizures at U S Borders Composition of Commodities FY2018 Estimated MSRP millions of U S dollars Source CRS analysis of data from Department of Homeland Security “Intellectual Property Rights Seizure Statistics Fiscal Year 2018 ” Notes Based on manufacturer’s suggested retail price MSRP of goods had they been genuine “Other” includes consumer products computers accessories automotive aerospace toys and more Overall U S Estimates U S industries that rely on IPR protection claim to lose billions of dollars in revenue annually due to piracy and counterfeiting Beyond these direct losses the United States may face additional “downstream” losses from counterfeiting and piracy IPR infringement could result in the loss of jobs that would have been created if the infringement did not occur which could translate into lost earnings by U S workers and in turn lost tax revenues for federal state and local governments 40 Attempts have been made in specific economic sectors to quantify the IPR infringement levels and related losses to legitimate U S businesses A private Commission on the Theft of American Intellectual Property estimates the total level of U S economic losses to international theft of U S IP to be hundreds of billions dollars per year In 2017 the commission estimated the annual cost to the U S economy due to counterfeit goods pirated software and theft of trade secrets to be between $225 billion and $600 billion this 40 There may be limitations on data estimating the impact of counterfeiting and piracy on the U S economy Some critics point out that many of the estimates for losses associated with IPR infringement are generated by industry groups that may have self-interested motivations Congressional Research Service 14 Intellectual Property Rights and International Trade estimate does not include the costs of patent infringement and economic espionage because they are difficult to quantify 41 These estimates have been cited widely including in the annual IP report to Congress by the U S Intellectual Property Enforcement Coordinator IPEC a statutorily created position in the White House P L 110-403 42 Efforts also have been made to quantify U S economic losses from IPR infringement in terms of specific countries see text box Estimate of Losses to U S Firms from IPR Infringement in China The U S International Trade Commission ITC estimated losses to “firms in the U S IP-intensive economy that conducted business in China in 2009” to be about $48 2 billion in sales royalties or license fees due to IPR infringement in China According to the ITC this estimate is based on statistical analysis that falls within a broad range of $14 2 billion to $90 5 billion the range reflects limitations of the underlying data as many firms were unable to calculate losses In terms of specific sectors the information other services sector sustained the largest losses—at a point estimate of $26 7 billion within a range of $11 8 billion to $48 9 billion In terms of specific types of IPR infringement losses from copyright infringement were the largest—at a point estimate of $23 7 billion within a range of $10 2 billion to $37 3 billion ITC also estimated that firms in the U S IP-intensive economy spent about $4 8 billion within a range of $279 1 million to $9 4 billion in 2009 to address possible Chinese IPR infringement According to submissions from stakeholders to the 2018 U S Trade Representative USTR Section 301 report on China there are also intangible losses to U S firms from IPR infringement For example technology transfer requirements when U S firms want to invest in the Chinese market may make U S firms less competitive in the global market when they lose exclusive rights to their IP In its submission to USTR for the purpose of the Section 301 report a U S firm estimated that it sustained “more than $120 million in damages in the form of lost sales and revenue” as a result of Chinese state-sponsored cyber theft The firm further stated that it lost its first-mover advantage and competitiveness in the market Source ITC China Effects of Intellectual Property Infringement and Indigenous Innovation Policies on the U S Economy Investigation No 332-519 USITC Publication 4226 May 2011 USTR Findings of the Investigation into China’s Acts Policies Practices Related to Technology Transfer Intellectual Property and Innovation Under Section 301 of the Trade Act of 1974 March 22 2018 Note ITC results reflect responses to an ITC questionnaire to 5 051 U S firms in sectors considered to be IPintensive ITC used statistical sampling techniques to extrapolate results to the U S IP-intensive economy 16 3% of the U S economy The statistical significance of the findings varied See the report for more information In terms of losses from cyber theft of IP a 2018 report by McAfee and the Center for Strategic and International Studies CSIS estimates annual losses to be $10 billion to $12 billion in the United States and $50 billion to $60 billion globally 43 The Organizational Structure of IPR Protection Given the importance of intellectual property to the U S economy and the economic losses associated with counterfeiting and piracy the United States is a leading advocate of strong global IPR rules Since the mid-1980s the United States has integrated IPR policy in its international trade policy activities pursuing enhanced IPR laws and enforcement through multilateral regional and bilateral trade agreements and national trade laws 41 U S Commission on the Theft of American Intellectual Property Update to the IP Commission Report February 2017 This Commission describes itself as an “independent and bipartisan initiative of leading Americans from the private sector public service in national security and foreign affairs academe and politics ” 42 U S Intellectual Property Enforcement Coordinator IPEC Annual Intellectual Property Report to Congress February 2019 p 32 43 James Lewis Economic Impact of Cybercrime–No Slowing Down Center for Strategic and International Studies CSIS February 2018 Congressional Research Service 15 Intellectual Property Rights and International Trade Multilateral IPR System World Trade Organization WTO At the center of the present multilateral trading system is the World Trade Organization an international organization established in 1995 as the successor to the General Agreements on Tariffs and Trade GATT 44 The WTO was established as the result of the Uruguay Round of multilateral trade negotiations 1986-1994 which led to agreements to liberalize and establish or enhance rules on trade in goods services agriculture and other nontariff barriers to trade One of the Uruguay Round agreements was the Agreement on Trade-Related Aspects of Intellectual Property Rights which sets minimum standards on IPR protection and enforcement with which all WTO member states must comply The United States European countries and the IPR business community were instrumental in including IPR on the Uruguay Round agenda Many developing countries were wary of including IPR in trade negotiations preferring to discuss treatment of IP under the World Intellectual Property Organization see below instead However developing countries agreed to address IP issues in the WTO after being granted delayed compliance periods and after achieving negotiating goals on other issues such as the end of quotas on textiles and clothing While previous international treaties on IPR continue to exist the TRIPS Agreement was the first time that intellectual property rules were incorporated into the multilateral trading system Two basic tenets of the TRIPS Agreement are national treatment signatories must treat nationals of other WTO members no less favorably in terms of IPR protection than the country’s own nationals and most-favored-nation treatment any advantage in IPR protection granted to nationals of another WTO member shall be granted to nationals of all other WTO member states Much of the TRIPS Agreement sets out the extent of the agreement’s coverage of the various types of intellectual property patents copyrights trademarks trade secrets GIs industrial designs layout of circuitry design and test data The TRIPS Agreement provisions build on several existing IPR treaties administered by the WIPO discussed below Another part of the TRIPS Agreement provides standards of enforcement for IPR covered by the agreement It enumerates standards for civil and administrative procedures and remedies the application of border measures and criminal procedures A Council for the TRIPS Agreement was established to monitor implementation of the agreement and transitional arrangements were devised for developing countries Finally the agreement provides for the resolution of disputes under the Uruguay Round Agreement’s Dispute Settlement Understanding see text box The binding nature of the WTO dispute settlement mechanism with the possibility of the withdrawal of trade concessions usually the reimposition of tariffs for noncompliance sets this agreement apart from previous IPR treaties that did not have effective dispute settlement mechanisms 44 The GATT was originally established in 1947 Congressional Research Service 16 Intellectual Property Rights and International Trade U S WTO Cases Against China on IPR The United States has filed three cases against China regarding IP two that challenged Chinese practices under the TRIPS Agreement and one challenge under the General Agreement on Trade in Services GATS The first two were brought under the George W Bush Administration and the third under President Trump DS 362 Measures Affecting the Protection and Enforcement of Intellectual Property Rights In this case brought in 2007 the dispute settlement panel largely ruled in the favor of the United States that  China’s denial of copyright protection to works without censorship approval is inconsistent with the TRIPS Agreement  China’s practice to publicly auction IPR-infringing goods seized at the border with the only requirement being that fake brands and trademarks be removed from the goods is impermissible under the TRIPS Agreement However the panel ruled that more evidence was needed before deciding whether the thresholds for prosecution of counterfeiting and piracy in China’s criminal law were consistent with the TRIPS Agreement China agreed to implement the WTO’s ruling DS363 Publications and Audiovisual Products In August 2009 a WTO panel ruled that a number of China’s restrictions on trading rights and distribution of IPR-related products were inconsistent with GATS However the WTO panel did not address whether China’s censorship policies or import limitations on foreign films violate WTO rules China agreed to implement the WTO’s ruling DS542 Certain Measures Concerning the Protection of Intellectual Property Rights In this case the United States alleges that China allows domestic firms to continue to use patented technology after a licensing contract ends and requires contracts that discriminate against foreign technology Consultations were requested in March 2018 and a panel was composed in January 2019 However the case has been suspended since June 11 2019 to allow for continued consultations between the United States and China The United States and China signed a phase one trade agreement on January 15 2020 to resolve some issues raised by the United States under Section 301 of the Trade Act of 1974 Among other things China committed to strengthen IP enforcement but most U S concerns on IP technology transfers and other issues remain to be addressed in a potential phase two deal 45 The TRIPS Agreement also seeks a balance of rights and obligations between protecting private right holders and the obligation “to secure social and cultural development that benefits all ”46 Article 7 declares that the protection and enforcement of IPR should contribute to the promotion of technological innovation and to the transfer and dissemination of technology to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare and to a balance of rights and obligations This paragraph attempts to link the protection of IPR with greater technology transfer including technology covered by IPR protection to the developing world The language itself has been interpreted in various ways Developed countries have tended to consider this language exhortatory but developing countries have tried without much success to make technology transfer a meaningful obligation within the TRIPS Agreement system Article 66 2 of the agreement requires developed country members to provide incentives to their enterprises and institutions to promote technology transfer to least-developed countries LDCs to assist them in establishing a viable technology base Developed countries report annually on their efforts to encourage technology transfer Complying with international IPR standards may impose greater burdens on developing countries than developed countries Developing countries generally have to engage in greater efforts to bring their laws judicial processes and enforcement mechanisms into compliance with the 45See CRS In Focus IF11284 U S -China Trade and Economic Relations Overview by Karen M Sutter and CRS Insight IN11208 U S Signs Phase One Trade Deal with China by Karen M Sutter 46 Pascal Lamy “Trade-Related Aspects of Intellectual Property Rights - Ten Years Later ” Journal of World Trade October 2004 p 925 Congressional Research Service 17 Intellectual Property Rights and International Trade TRIPS Agreement Consequently developing countries were given an extended period of time in which to bring their laws and enforcement mechanisms into compliance with the TRIPS Agreement Developing countries and post-Soviet states were given an additional four years from the entry into force of the agreement January 1 1995 For products that were not covered by a country’s patent system such as pharmaceuticals in many cases an additional five years was granted to bring such products under coverage For developing countries all provisions of the TRIPS agreement should now be in force For the least developed countries the phase-in period for IPR commitments was originally extended 10 years to January 1 2006 Article 66 1 In 2002 the WTO extended IPR obligations for LDCs with respect to pharmaceuticals to January 1 2016 47 In addition the WTO has extended the overall transitional period twice for LDCs 48 As such LDCs are not required to apply TRIPS Agreement provisions—other than Articles 3 4 and 5 until July 1 2021 or until they cease to be LDCs 49 Article 66 1 acknowledges the special needs and requirements of least-developed country Members their economic financial and administrative constraints and their need for flexibility to create a viable technological base Doha Declaration on the TRIPS Agreement and Public Health In agreeing to launch the Doha Round of WTO trade negotiations trade ministers adopted a “Declaration on the TRIPS Agreement and Public Health” on November 14 2001 50 The Declaration sought to alleviate developing country dissatisfaction with aspects of the TRIPS regime It delayed the implementation of patent system provisions for pharmaceutical products for LDCs until 2016 The declaration committed member states to interpret and implement the agreement to support public health and to promote access to medicines for all The Declaration recognized certain “flexibilities” in the TRIPS Agreement to allow each member to grant compulsory licenses for pharmaceuticals and to determine what constitutes a national emergency expressly including public health emergencies such as HIV AIDS malaria and tuberculosis or other epidemics Paragraph 6 of the Doha Declaration directed the WTO members to formulate a solution to a related concern the use of compulsory licensing by countries with insufficient or inadequate manufacturing capability See COVID-19 text box below On the eve of the Cancun Ministerial in August 2003 WTO members agreed on a Decision51 to waive the domestic market provision of the TRIPS article on compulsory licensing Article 31 f for exports of pharmaceutical products for “HIV AIDS malaria tuberculosis and other epidemics” to LDCs and countries with insufficient manufacturing capacity This Decision was incorporated as an amendment to the TRIPS agreement at the Hong Kong Ministerial in December 2005 “Extension of the Transition Period under Article 66 1 of the TRIPS Agreement for Least-Developed Country Members for Certain Obligations with Respect to Pharmaceutical Products ” WTO Document IP C 25 July 1 2002 48 WTO TRIPS Council “Extension of the Transition Period Under Article 66 1 for Least Developed Country Members ” June 12 2013 49 TRIPS Article 3 provides for national treatment and TRIPS Article 4 provides for most-favored-nation treatment TRIPS Article 5 states that obligations under Article 3 and 4 do not apply to procedures provided under WIPO agreements related to the acquisition or maintenance of IPRs 50 Declaration on the TRIPS Agreement and Public Health WT MIN 01 DEC 2 November 14 2001 available at http www wto org english thewto_e minist_e min01_e mindecl_trips_e htm 51 “Implementation of Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health ” IP C W 405 August 30 2003 and accompanying Chairman’s statement available at http www wto org english news_e pres03_e pr350_e htm 47 Congressional Research Service 18 Intellectual Property Rights and International Trade The amendment required ratification from two-thirds of WTO member states The deadline for ratification was extended five times before the amendment entered into force on January 23 2017 To date 102 of the total 162 WTO members52 have ratified the amendment 53 A group of high-income countries Australia Canada the European Union Iceland Japan New Zealand Norway Switzerland and the United States declared they would not avail themselves of this option as importers 54 The system established by the WTO allows LDCs and countries without sufficient manufacturing capacity to issue a compulsory license to a company in a country that can produce such a product After a matching compulsory license is issued by the producer country the drug can be manufactured and exported subject to various notification requirements as well as quantity and safeguard restrictions While several exporting countries have established laws and procedures for implementing this system one Rwanda has availed itself of the system to import HIV AIDS medicines from a generic manufacturer in Canada 55 COVID-19 and Access to Medicine The Coronavirus Disease 2019 COVID-19 pandemic may reopen a debate over the relationship between WTO trading rules and countries’ ability to obtain needed drugs or vaccinations As noted above TRIPS created the first enforceable minimum standards for international IPR It affirmed that patents “shall be available for any inventions…in all fields of technology provided that they are new involve an inventive step and are capable of industrial application ” It also applied the principle of nondiscrimination on issuance of patents based on technology place of invention or site of use This standard was particularly important to innovative pharmaceutical manufacturers because several countries did not provide for patenting pharmaceutical products prior to TRIPS or as in the case of India provided process patents that covered the manufacturing process but not product itself However TRIPS does provide for limited exceptions to the patent right For example a country may limit patent rights provided the limitation does not “unreasonably” conflict with the normal exploitation of a patent The agreement also contains exceptions allowing a party to exclude from patentability items to protect human life and health as well as diagnostic therapeutic and surgical measures The Doha Declaration on TRIPS and Public Health see above affirmed that TRIPS provisions should be interpreted to promote public health and access to medicine TRIPS also allows for compulsory licensing but places limitations on its use A compulsory license is an authorization by a government for third parties such as a company or the government itself to manufacture or use a product under patent without the permission of the rights holder TRIPS permits signatories to issue compulsory licenses for patented inventions if the third party attempts to obtain permission from the patent holder and negotiates reasonable commercial terms although this requirement can be waived in times of national emergency or other extenuating circumstances In any case the third party must provide “adequate” remuneration to the patent holder for the use of the patent Another restriction limits its use primarily to the domestic market although countries may issue compulsory license to send products to least-developed countries that lack domestic production capabilities The allowance for least-developed countries and a clarification of the meaning of national emergency became part of the amendment to TRIPS that originated with the Doha Declaration U S bilateral and regional FTAs largely have not addressed the issue of compulsory licensing but have contained provisions incorporating the Doha Declaration In practice the use of compulsory licenses has been rare the threat of invoking a compulsory license as a negotiating tactic for countries to obtain better prices from a manufacturer has been more common The United States generally has sought to dissuade other nations from using compulsory licensing even placing greater 52 The European Union EU signed an Instrument of Acceptance for EU members “Members accepting amendment of the TRIPS Agreement ” http www wto org english tratop_e trips_e amendment_e htm 54 TRIPS Article 31bis Annex b fn 3 55 WTO “TRIPS and public health dedicated webpage for notifications ” https www wto org english tratop_e trips_e public_health_e htm 53 Congressional Research Service 19 Intellectual Property Rights and International Trade limitations on its use in early U S FTAs with Australia Singapore and Jordan However with the COVID-19 virus it has been reported that certain governments are taking preliminary steps to revisit its use Israel is the first country to issue a compulsory license in the context of COVID-19 for the AbbVie drug Kaletra lopinavir ritonavir The next day AbbVie announced it would no longer enforce patents worldwide for lopinavir ritonavir 56 In March 2020 the parliaments of Canada and Germany passed legislation clarifying or streamlining the ability to use compulsory licenses in their countries The National Assemblies of Chile and Ecuador are calling for the use of compulsory licenses in fighting the COVID-19 pandemic 57 For more information see see CRS Legal Sidebar LSB10436 COVID-19 International Trade and Access to Pharmaceutical Products by Nina M Hart World Intellectual Property Organization WIPO In addition to the WTO the other main multilateral venue for addressing IPR issues is the World Intellectual Property Organization a specialized agency affiliated with the United Nations with its own executive legislative and budgetary powers Established in 1970 following the 1967 WIPO Convention’s entry into force WIPO is charged with fostering the effective use and protection of intellectual property globally WIPO’s mandate focuses exclusively on intellectual property in contrast to the WTO’s broader international trade mandate WIPO’s antecedents are the 1883 Paris Convention for the Protection of Industrial Property and the 1886 Berne Convention for the Protection of Literary and Artistic Work Most of the substantive provisions of these two treaties are incorporated in the WTO’s TRIPS Agreement WIPO’s primary function is to administer a group of IPR treaties which put forth minimum standards for member states All international IPR treaties save TRIPS are administered by WIPO The Trump Administration has prioritized the need to counter growing Chinese influence in global functional organizations including WIPO Its goal is to preserve the integrity of these organizations to ensure they remain impartial and credible and that their focus and work continue to support U S interests and key tenets of the open global trading system including protection of IPR On February 26 2020 China’s ambassador to the United Nations Chen Xu accused the United States of meddling in the upcoming World Intellectual Property Organization leadership election U S diplomats reportedly lobbied to block China’s candidate Wang Binying and promote Daren Tang a candidate nominated by Singapore On March 4 2020 the WIPO Coordination Committee nominated Daren Tang to be the next Director General of WIPO Mr Tang prevailed with 55 votes while Ms Wang received 28 votes To address digital technology issues not dealt with in the TRIPS Agreement WIPO established the WIPO Copyright Treaty WCT and WIPO Performance and Phonograms Treaty WPPT in 1996 oftentimes collectively referred to as the “WIPO Internet Treaties ” These treaties establish international norms aimed at preventing unauthorized access to and use of creative works on the internet or other digital networks Other WIPO activities include patent law harmonization efforts In 2000 WIPO signatories adopted the Patent Law Treaty PLT which called for harmonization of patent procedures This agreement went into force on April 28 2005 Discussions began in 2001 for a Substantive Patent Law Treaty SPLT which would target harmonization issues specifically related to patent grants “Israel defies AbbVie to import generic drugs for COVID-19 ” by Dani Kass Law360 March 19 2020 https www law360 com articles 1255079 israel-defies-abbvie-ip-to-import-generic-drugs-for-covid-19 57 “Corona virus pandemic could change global patent rights ” by Adam Behsudi Politico Pro Trade April 1 2020 56 Congressional Research Service 20 Intellectual Property Rights and International Trade but were put on hold in 2006 Different views reportedly emerged among developed and developing countries on what should be the objectives of substantive harmonization of patent laws including whether it was an appropriate goal 58 Government leaders participating in the Group of 8 G-8 meeting in July 2008 called for “accelerated discussions” of the SPLT 59 While discussions remain stalled the main focus of the WIPO’s work in this area has been on “building a technical and legal resource base from which to hold informed discussions in order to develop a work program” on various patent issues 60 Presently patent law harmonization efforts also are occurring in groupings outside of WIPO including the Trilateral Cooperation composed of the European Patent Office Japan Patent Office and U S Patent and Trademark Office USPTO another forum is the IP5 composed of the members of the Trilateral Cooperation and also the Korean Intellectual Property Office and China’s State Intellectual Property Office 61 WIPO’s other functions include assisting member states through training programs legislative information intellectual property institutional development automation and office modernization efforts and public awareness activities WIPO’s enforcement activities are more limited than those of the WTO Through its Advisory Committee on Enforcement ACE WIPO cooperates with member states to promote international coordination on enforcement activities U S Trade Law Several provisions of U S law address IPR trade policy and enforcement These laws are implemented and administered by a number of U S government agencies and coordinating bodies see Table 4 and Appendix A Special 301 Section 301 of the Trade Act of 1974 as amended P L 93-618 19 U S C §2242 is the principal U S statute for identifying foreign trade barriers due to inadequate intellectual property protection The 1988 Omnibus Trade and Competitiveness Act P L 100-418 strengthened section 301 by creating “Special 301” provisions which require the USTR to conduct an annual review of foreign countries’ intellectual property policies and practices By April 30 of each year the USTR must identify countries that do not offer “adequate and effective” protection of IPR or “fair and equitable market access” to U S entities that rely on intellectual property rights According to an amendment to the Special 301 provisions by the Uruguay Round Agreements Act P L 103-465 the USTR can identify a country as denying sufficient intellectual property protection even if the country is complying with its TRIPS commitments These findings are submitted in the USTR’s annual “Special 301” report see Table 3 Most recently the Trade Facilitation and Trade Enforcement Act of 2015 P L 114-125 added trade secrets to list of the types of IPR whose protection by a foreign country is subject to monitoring under Special 301 The USTR can designate countries in one of several statutorily or administratively created categories David J Kappos “Patent Law Harmonization The Time is Now ” Landslide vol 3 no 6 July August 2011 Monika Ermert “G8 Governments Want ACTA Finalised This Year SPLT Talks Accelerated ” Intellectual Property Watch July 9 2008 60 WIPO “Standing Committee on the Law of Patents SCP ” http www wipo int policy en scp 61 U S Patent and Trademark Office “Harmonization ” http www uspto gov learning-and-resources ip-policy harmonization 58 59 Congressional Research Service 21 Intellectual Property Rights and International Trade      Priority Foreign Country A statutory category for those designated by the USTR as having “the most onerous or egregious acts policies or practices that deny intellectual property protection and limit market access to U S persons or firms depending on intellectual property rights protection” with the “greatest adverse impact actual or potential on the relevant United States products ” These countries may be investigated under section 301 provisions of the Trade Act of 1974 62 If a country is named as a “Priority Foreign Country ” the USTR must launch an investigation into that country’s IPR practices The USTR may suspend trade concessions and impose import restrictions or duties or enter into a binding agreement with the priority country that would eliminate the act policy or practice under scrutiny Since the advent of the WTO the United States has brought cases to the WTO rather than impose unilateral retaliation Priority Watch List An administrative category created by the USTR for those countries whose acts policies and practices warrant concern but who do not meet all of the criteria for identification as Priority Foreign Country The USTR may place a country on the Priority Watch List when the country lacks proper intellectual property protection and has a market of significant U S interest If designated on the Priority Watch List the USTR must develop an action plan with respect to that foreign country If the President in consultation with USTR determines that the foreign country fails to meet the action plan benchmarks then the President may take appropriate action with respect to the foreign country Watch List An administrative category created by USTR to designate countries that have intellectual property protection inadequacies that are less severe than those on the Priority Watch List but still attract U S attention Section 306 Monitoring A tool used by USTR to monitor countries for compliance with bilateral intellectual property agreements used to resolve investigations under section 301 Out-of-Cycle Review A tool used by USTR to monitor countries’ progress on intellectual property issues and which may result in status changes for the following year’s Special 301 report In 2010 USTR also began publishing annually the Notorious Markets List as an out-of-cycle review separately from the annual Special 301 report the report identifies online and physical markets “that reportedly engage in facilitate turn a blind eye to or benefit from substantial copyright piracy and trademark counterfeiting ” Table 3 USTR 2020 Special 301 Report Country Designations Special 301 Category 2020 Special 301 Designation Priority Foreign Country No countries listed this year Priority Watch List Algeria Argentina Chile China India Indonesia Russia Saudi Arabia Ukraine and Venezuela Watch List Barbados Bolivia Brazil Canada Colombia Dominican Republic Ecuador Egypt Guatemala Kuwait Lebanon Mexico Pakistan Paraguay Peru Romania Thailand Trinidad Tobago Turkey Turkmenistan United Arab Emirates Uzbekistan and Vietnam Section 306 Monitoring China 62 For the Special 301 provisions see 19 U S C §2242 Trade Act of 1974 as amended P L 93-618 §182 Congressional Research Service 22 Intellectual Property Rights and International Trade Special 301 Category 2020 Special 301 Designation Out-of-Cycle Reviews Saudi Arabia upcoming Malaysia and “notorious markets” Source CRS adaption from USTR 2020 Special 301 Report Notes For the 2020 Special 301 Report USTR reviewed the IPR policies and practices of more than 100 countries and designated 36 of the countries in one of several categories The Special 301 statute provides the overall guideline for identifying countries for the various lists However placement on one of the lists takes into consideration a host of factors specific to the country including the level and scope of the country’s IPR infringement and their impact on the U S economy the strength of the country’s IPR laws and the effectiveness of their enforcement progress made by the country in improving IPR protection and enforcement in the past year and the sincerity of the country’s commitment to multilateral and bilateral trade agreements No “weighting criteria” or formula exists to determine the placement of a country on the watch list Furthermore no particular threshold exists for determining when a country should be upgraded or downgraded on the list In making determinations the USTR gathers information based on its annual trade barriers reports as well as consultations with a wide variety of sources including industry groups other private sector representative Congress and foreign governments Section 301 Title III of the Tariff Act of 1930 as amended Sections 301 through 310 19 U S C §2411 — collectively referred to as “Section 301”—grants the USTR a range of responsibilities and authorities to investigate and take action to enforce U S rights under trade agreements and respond to certain foreign trade practices 63 Section 301 provides a statutory means by which the United States imposes trade sanctions on foreign countries that violate U S trade agreements or engage in acts that are “unjustifiable” or “unreasonable” and burden U S commerce Prior to 1995 the United States used Section 301 extensively to pressure other countries to eliminate trade barriers and open markets to U S exports The creation of an enforceable dispute settlement mechanism in the WTO significantly reduced U S use of Section 301 The United States retains the flexibility to determine whether to seek recourse for foreign unfair trade practices in the WTO and or act unilaterally President Trump has been more willing to act unilaterally to promote what the Administration considers to be “free ” “fair ” and “reciprocal” trade The President has imposed increased tariffs under Section 301 on U S imports from China due to concerns over China’s forced technology transfer requirements and intellectual property rights practices including cyber-enabled theft of U S IPR and trade secrets 64 The Phase I trade deal that the Trump Administration reached with the Chinese government addresses some aspects of IP issues while leaving other systemic IP issues to address in potential bilateral trade talks 65 Section 337 Section 337 of the Tariff Act of 1930 as amended 19 U S C §1337 prohibits unfair methods of competition or other unfair acts in the importation of products into the United States It also prohibits the importation of articles that infringe valid U S patents copyrights processes trademarks semiconductor products produced by infringing a protected mask work e g 63 CRS In Focus IF11346 Section 301 of the Trade Act of 1974 by Andres B Schwarzenberg For more information see CRS In Focus IF10708 Enforcing U S Trade Laws Section 301 and China by Wayne M Morrison 65 CRS Insight IN11208 U S Signs Phase One Trade Deal with China by Karen M Sutter 64 Congressional Research Service 23 Intellectual Property Rights and International Trade integrated circuit designs or protected design rights While the statute has been used to counter imports of products judged to be produced by unfair competition monopolistic or anticompetitive practices in recent years it has become increasingly used for its IPR enforcement functions Under the statute the import or sale of an infringing product is illegal only if a U S industry is producing an article covered by the relevant IPR or is in the process of being established Unlike other trade remedies such as antidumping or countervailing duty actions no showing of injury due to the import is required for “statutory” IP cases The U S International Trade Commission ITC administers Section 337 proceedings ITC investigates complaints either brought to it mainly by companies or ones commenced under its own initiative An administrative law judge provides an initial determination to the ITC which can accept the initial determination or order a further review of it in whole or in part If the ITC finds a violation it may issue two types of remedies exclusion orders or cease and desist orders   Exclusion orders enforced by the U S Customs and Border Protection CBP are issued to stop infringing imports from entering the United States Exclusion orders can be general or limited General exclusion orders apply to all products that are found in violation of Section 337 regardless of source Limited exclusion orders apply to the goods originating from the specific firm s found to be in violation of Section 337 Limited exclusion orders typically are the more commonly issued type of exclusion order The ITC issues general exclusion orders if such a broad-based exclusion is necessary to prevent the circumvention of the limited exclusion order or if there is a pattern of violation and it is difficult to identify the source of infringing products Cease and desist orders enforced by ITC require the firm to stop the sale of the infringing product in the United States The ITC may consider several public interest criteria and decline to issue a remedy Also the President may disapprove a remedial order during a 60-day review period for “policy reasons ” A presidential review of a remedial order often considers several relevant factors including “ 1 public health and welfare 2 competitive conditions in the U S economy 3 production of competitive articles in the United States 4 U S consumers and 5 U S foreign relations economic and political ”66 The number of active Section 337 investigations conducted by the ITC generally has trended upward over the past decade see text box The overwhelming majority of Section 337 cases involve allegations by private firms of patent infringement Investigations concern a range of technologies including smartphones and other wireless devices smart televisions semiconductors GPS devices windshield wiper blades and tires 67 According to the ITC there is “substantial overlap between the industries that dominate our IP docket and the four industries determined in a Department of Commerce study to be the most patent-intensive industries in the United States”—computer and peripheral equipment communications equipment semiconductor and other electronic components and other computer and electronic products 68 FY2019 Section 337 Statistics 66 S Rep No 93-1298 93d Cong 2d Sess 199 1974 ITC Budget Justification Fiscal Year 2016 p 7 68 Ibid p 19 Department of Commerce Intellectual Property and the U S Economy Industries in Focus March 2012 67 Congressional Research Service 24 Intellectual Property Rights and International Trade Number of new complaints and ancillary proceedings – 58 compared to 40 in FY2006 Number of investigations and ancillary proceedings completed – 60 compared to 30 in FY2006 Number of active investigations 127 in FY2019 compared to 70 in FY2006 Types of unfair acts alleged in active investigations sole patent infringement – 110 solely trademark infringement – 3 solely trade secret misappropriation – 4 combination of unfair acts alleged - 10 Number of investigations completed on the merits 22 compared to 12 in FY2006 Length of investigations completed on the merits shortest – 9 4 months longest – 29 3 months average -17 7 months compared to in FY2006 shortest – 3 5 months longest 19 0 months and average – 12 0 months Number of active exclusion orders as of December 31 2018 114 Number of remedial orders issued general exclusion orders - 5 limited exclusion orders - 10 cease and desist orders – 16 compared to in FY2006 GEOs – 3 LEOs -5 CDOs – 2 Settlement consent order share of total number of investigations terminated – 33% of 42 investigations compared to 46% of 26 investigations in FY2006 Complaints withdraw share of total number of investigations terminated – 12% of 42 investigations compared to 8% of 26 investigations in FY2006 Source U S International Trade Commission Legislative efforts related to Section 337 have focused on addressing jurisdictional problems associated with holding foreign websites accountable for piracy and counterfeiting renewing congressional and public debate about the balance between protecting U S intellectual property and promoting innovation 69 Congress could take these issues up again as well as other issues including the effectiveness of CBP’s enforcement of Section 337 exclusion orders A 2014 Government Accountability Office study found that CBP’s management of its exclusion order process at ports contained weaknesses that result in inefficiencies and an increased risk of infringing products entering U S commerce it recommended that CBP update its internal guidance related to sharing information sharing for trade alerts and monitoring 70 CBP has since implemented recommendations to ensure that active exclusion orders from the ITC are posted on CBP’s intranet 71 Generalized System of Preferences The Generalized System of Preferences GSP is a U S trade and development program that provides preferential duty-free entry to certain products from designated developing countries 72 The purpose of the program is to foster economic growth in developing countries by increasing their export markets GSP operates on a nonreciprocal basis The Trade Act of 1974 as amended 19 U S C §2461-67 authorized the GSP for a ten-year timeframe and the program has been renewed from time to time Congress most recently extended the GSP program until December 31 2020 in the Consolidated Appropriations Act 2018 P L 115-141 Although GSP is nonreciprocal it can be used to promote stronger intellectual property protection and enforcement abroad Under the GSP statute the President must consider a set of mandatory 69 For example see S 2029 and H R 3782 the Online Protection and Enforcement of Digital Trade Act introduced in the 112th Congress 70 Government Accountability Office GAO Intellectual Property U S Customs and Border Protection Could Better Manage its Process to Enforce Exclusion Orders GAO-15-78 November 2014 71 GAO follow-up with CBP on recommendations For more information see https www gao gov products GAO-1578 72 See CRS Report RL33663 Generalized System of Preferences GSP Overview and Issues for Congress by Vivian C Jones Congressional Research Service 25 Intellectual Property Rights and International Trade criteria that a country must fulfill in order to be designated as a GSP beneficiary Additionally the President may evaluate a country on the basis of certain discretionary criteria including the country’s provision of IPR protection 73 For example in light of heightened concern over India’s intellectual property environment President Trump removed India from the Generalized System of Preferences beneficiary list on May 31 2019 74 The GSP program undergoes an annual review by the GSP Subcommittee of the interagency Trade Policy Staff Committee TPSC which is headed by the USTR As part of its evaluation the TPSC addresses concerns about specific country practices such as intellectual property protection and makes recommendations to the President In October 2019 the President partially restored GSP benefits to Ukraine for certain products based on the determination that the country made progress towards providing IPR protection Ukraine’s GSP benefits had been suspended in December 2017 75 Based on industry petitions concerning IPR protection USTR reports as ongoing its reviews of the country practices of Indonesia South Africa and Uzbekistan 76 Table 4 IPR-Related U S Government Agencies and Coordinating Bodies Department of Commerce Patent and Trademark Office International Trade Administration Department of Homeland Security Customs and Border Protection Immigration and Customs Enforcement U S Secret Service Department of Justice Civil Division Criminal Division Federal Bureau of Investigation Office of Justice Program U S Attorney’s Office Other Federal Agencies Coordinating and Advisory Bodies U S Trade Representative Department of Health and Human Services Food and Drug Administration Library of Congress Copyright Office Department of State U S Agency for International Development U S International Trade Commission Office of the U S Intellectual Property Enforcement Coordinator IPEC National Intellectual Property Rights Coordination Center IPR Center Interagency for Trade Implementation Monitoring and Enforcement ICTIME Private Sector Advisory Committee System Source CRS analysis Notes For more information see Appendix A 73 91 U S C §2462 b 2 “Proclamation to Modify the List of Beneficiary Developing Countries Under the Trade Act of 1974 ” May 31 2019 https www whitehouse gov presidential-actions proclamation-modify-list-beneficiary-developing-countries-trade-act1974-2 75 Proclamation 9955 “To Modify Duty-Free Treatment Under the Generalized System of Preferences and for Other Purposes ” 84 Federal Register 58567 October 31 2019 76 USTR “Active GSP Country Practices Reviews ” updated as of December 2019 74 Congressional Research Service 26 Intellectual Property Rights and International Trade U S Trade Promotion Authority and Negotiating Objectives Trade promotion authority TPA is the time-limited authority that Congress uses to set U S trade negotiating objectives to establish notification and consultation requirements and to have implementing bills for certain reciprocal trade agreements considered under expedited procedures provided certain statutory requirements are met 77 In recent grants of TPA IPR issues have become important negotiating objectives IPR negotiating objectives for FTAs were first enacted by the Omnibus Trade and Competitiveness Act of 1988 P L 100-418 The statute sought enactment and enforcement of adequate IPR protection from negotiating partners It also sought to strengthen international rules dispute settlement and enforcement procedures through the General Agreement on Tariffs and Trade and other existing intellectual property conventions This negotiating mandate led to the establishment of the TRIPS Agreement during the Uruguay Round of multilateral trade liberalization negotiations and the IPR provisions in the North American Free Trade Agreement In the period since the 1988 Act the IPR provisions of NAFTA and the TRIPS Agreement became the template for other bilateral or regional FTAs The focus of IPR negotiating objectives shifted from creating to strengthening the IPR trade regime with the Trade Promotion Authority Act of 2002 P L 107-210 under which several FTA negotiations were concluded by the George W Bush Administration 2002 Trade Promotion Authority The IPR negotiating objectives in the 2002 TPA were highly significant to the future contours of U S FTA negotiations The objective to negotiate trade agreements IPR terms that “reflect a standard of protection similar to that found in U S law” led to the negotiation of provisions that go beyond the level of protection provided in the WTO TRIPS Agreement Often referred to as “TRIPS-plus” provisions they include expanding IPR to new sectors establishing more extensive standards of protection and reducing the flexibility options available in TRIPS such as with respect to compulsory licensing Some of the new measures also address technological innovations that have come about since the TRIPS Agreement The objective to apply existing IPR protections to digital media reflected the changing nature of global commerce The language sought to extend provisions for IPR protection to new and emerging technologies and methods of transmission and dissemination The language also called for standards of enforcement to keep pace with technological change and allow right holders legal and technological protections for their works over the internet and other new media May 10 2007 Bipartisan Trade Agreement The May 10 2007 Bipartisan Trade Agreement “May 10 Agreement” —related to the thenpending FTAs with Colombia Panama Peru and South Korea—established certain flexibilities for patent protections to promote further access to medicines in developing countries while maintaining a strong overall level of IPR protection 78 After the transfer of control of the House following the 2006 elections some Members of the new Democratic majority sought certain changes in these pending U S FTAs With respect to IPR the congressional leadership sought to 77 See CRS Report RL33743 Trade Promotion Authority TPA and the Role of Congress in Trade Policy by Ian F Fergusson 78 The May 10 2007 Bipartisan Agreement on Trade Policy is available at https ustr gov archive assets Document_Library Fact_Sheets 2007 asset_upload_file127_11319 pdf Congressional Research Service 27 Intellectual Property Rights and International Trade ensure that pending FTAs allowed developing country trading partners enough flexibility both to meet their IPR obligations and to promote access to life-saving medicines A Bipartisan Trade Agreement between the Bush Administration and the House leadership building on the 2002 TPA negotiating objectives was reached on May 10 2007 79 Following the Agreement IPR language previously negotiated in the FTAs with Peru Panama and Colombia was modified to reflect its principles The U S -South Korea FTA KORUS was not modified because the United States considers South Korea to be a developed country 2015 Trade Promotion Authority Congress passed the Bipartisan Comprehensive Trade Promotion and Accountability Act P L 114-26 TPA-2015 in June 2015 and President Obama signed the legislation on June 29 2015 The IPR negotiating objectives include and expand on the 2002 objectives The 2015 objectives recognize the importance of digital trade to the economy and seek provisions to prohibit cyberand trade secret theft The IPR objectives are considered principal negotiating objectives This means that a procedural disapproval resolution could be introduced to strip FTA implementing legislation of expedited legislation procedures if the legislation fails “to make progress on the policies priorities and objectives of the Act ”80 The objectives include        Furthering adequate and effective protection of IPR through accelerated full implementation of the TRIPS Agreement and by ensuring FTAs negotiated by the United States “reflect a standard of IPR protection similar to that found in U S law” Protecting IPR related to new technologies and new methods of transmission and distribution in a manner that “facilitates legitimate trade” Eliminating discriminatory treatment in the use and enforcement of IPR Ensuring adequate rights holder protection through digital rights management practices Providing for strong enforcement of IPR Negotiating the prevention and elimination of government involvement in violations of IPR such as cyber-theft or piracy 81 and Reaffirming the Doha Declaration on the TRIPS Agreement and Public Health with additional language to “ensure that trade agreements foster innovation and access to medicine ”82 79 CRS Report RL33743 Trade Promotion Authority TPA and the Role of Congress in Trade Policy by Ian F Fergusson and CRS Report R43491 Trade Promotion Authority TPA Frequently Asked Questions by Ian F Fergusson and Richard S Beth 80 ibid 81 A related protection of trade secrets and proprietary information collected by governments in the furtherance of regulations was contained in the negotiating objective on regulatory coherence 82 This objective that did not specifically refer to the patent protection provisions found in the May 10 2007 Bipartisan Trade Agreement discussed above and the added language seemingly could have been used to justify including or excluding those provisions in future FTAs Congressional Research Service 28 Intellectual Property Rights and International Trade Free Trade Agreements and Negotiations under the Trump Administration In recent years the United States increasingly has focused on free trade agreements FTAs as an instrument to promote stronger IPR regimes by foreign trading partners IPR chapters in trade agreements include provisions on patents copyrights trademarks trade secrets GIs and enforcement In general the United States has viewed the TRIPS Agreement and WIPOadministered treaties as a minimum standard and has pursued higher IPR protection and enforcement levels through regional and bilateral FTAs To date the United States has entered into 14 FTAs with 20 countries United States-Mexico-Canada Agreement USMCA USMCA is the first trade agreement approved by Congress under the 2015 TPA In many ways it builds on previous U S FTAs including NAFTA but it features some divergences from previous FTAs as well NAFTA was the first FTA to contain an IPR chapter which in turn was the model for the TRIPS Agreement that came into effect IPR Highlights in USMCA a year later in 1995 83 NAFTA predated the Digital enforcement Extends IPR enforcement widespread use of the commercial internet including for copyrights to the digital environment and subsequent IPR chapters in U S FTAs Trade secrets Requires criminal procedures and contain obligations more extensive than those penalties for trade secret theft including cyber-theft found in TRIPS and NAFTA also clarifies that state-owned enterprises are subject to trade secret protection requirements In general U S FTAs have followed the TPA Internet Service Providers ISPs Requires negotiating objective that agreements should “notice and takedown” processes to address ISP “reflect a standard of protection similar to that liability while allowing an alternative system to remain found in U S law ” In addition President for Canada “notice and notice” Trump’s objectives for the NAFTA Trademarks Extends trademark protection to renegotiation reflected TPA-2015 and the aims sounds and “collective marks” removes administrative requirements to enable easier protection and of U S negotiators in the Trans-Pacific enforcement of trademarks Partnership although in some instances the Geographical indications GIs Requires negotiated TPP outcomes were less administrative procedures for recognizing and opposing 84 extensive The United States achieved most GIs including guidelines for determining when a name of what it sought in the proposed USMCA is common Also for GIs protected through however the Administration and some international agreements includes requirements on Members of Congress subsequently negotiated transparency and opportunity to comment or oppose GI recognition several changes to the agreement including in the IPR chapter USMCA changes and the amendments known as the Protocol of Amendment POA are included in the description of core IPR provisions discussed further below USMCA is currently scheduled to come into effect on July 1 2020 but the ability to achieve the measures necessary to come into compliance with the accord have cast that timeframe into doubt 83 See CRS In Focus IF10033 Intellectual Property Rights IPR and International Trade by Shayerah Ilias Akhtar and Ian F Fergusson 84 The TPP was an FTA negotiated between the United States and 11 other countries in the Asia-Pacific region Upon taking office in 2017 President Trump withdrew the proposed agreement from U S consideration The 11 other countries subsequently ratified a revised agreement known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership CPTPP See CRS In Focus IF10000 TPP Overview and Current Status by Brock R Williams and Ian F Fergusson Congressional Research Service 29 Intellectual Property Rights and International Trade Ongoing and Future Free Trade Agreement Negotiations IPR issues may arise in a number of ongoing and future U S FTA negotiations under the Trump Administration It remains to be seen to what extent elements of USMCA will serve as a template for these negotiations On October 16 2018 the Trump Administration notified Congress under TPA of its intent to enter trade agreement negotiations with the EU the UK and Japan Regarding the EU the TPA notification followed the July 2018 Joint Statement agreed between President Trump and then-European Commission President Jean-Claude Juncker that aimed to de-escalate trade tensions including over tariff measures The negotiations appear to be at an impasse due to lack of U S -EU agreement over their scope While the U S specific negotiating objectives envision a broad-based trade agreement the EU negotiating mandate is limited to nonagricultural tariffs and some regulatory cooperation The U S -EU negotiating approach remains unclear including the extent to which the negotiations may address IP issues The United States and EU both maintain strong IPR standards and generally prioritize IPR protection and enforcement as a key trade negotiating objective In past U S -EU trade negotiations on the proposed Transatlantic Trade and Investment Partnership T-TIP under the Obama Administration treatment of IPR was a major point of debate 85 A key issue was and continues to be differing approaches to protection and enforcement of geographic indications The EU seeks strong GI protection because of GIs’ commercial value to EU producers e g Parmesan cheese Parma ham Feta cheese and Champagne The United States tends to protect GIs through trademark law—as opposed to a separate system—and expresses concern that the EU approach to GIs is “over-broad” and negatively affects trademarks and market access for U S products that use generic names 86 Despite these differences the United States and EU have potential for cooperation on other IP issues such as developing rules on trade secrets an area of U S and EU concern in light of increased instances of trade secret cyber-theft 87 Similar issues could arise in prospective U S -UK trade negotiations particularly to the extent that the UK remains aligned with EU rules and regulations GI issues while potentially significant may not be as charged as in the U S -EU trade negotiations A major issue for the UK is the potential impact of an FTA on pharmaceutical drug pricing According to the specific negotiating objectives issues issued by the USTR a U S priority for the negotiations is to “ s eek standards to ensure that government regulatory reimbursement regimes are transparent provide procedural fairness are nondiscriminatory and provide full market access for U S products ”88 In the UK there have been many public calls for ensuring that the National Health Service’s pharmaceutical pricing model is not undermined by any IP or regulatory commitments in a U S UK FTA In the case of Japan the scope of specific negotiating objectives released by the USTR include IPR as part of a broad range of issues to be covered in an agreement However the initial stage 85 See CRS Report R43387 Transatlantic Trade and Investment Partnership T-TIP Negotiations by Shayerah Ilias Akhtar Vivian C Jones and Renée Johnson 86 USTR 2012 National Trade Estimate Report on Foreign Trade Barriers March 2015 p 136 https ustr gov sites default files 2015%20NTE%20Combined pdf 87 Executive Office of the President Administration’s Strategy on Mitigating the Theft of U S Trade Secrets February 2013 http www whitehouse gov sites default files omb IPEC admin_strategy_on_mitigating_the_theft_of_u s _trade_secrets pdf 88 USTR “United States-United Kingdom Negotiations Summary of Specific Negotiating Objectives ” February 2019 Congressional Research Service 30 Intellectual Property Rights and International Trade one trade agreement reached by the United States and Japan which entered into force on January 1 2020 is limited to industrial and agricultural goods and cross-border digital trade 89 It is unclear if a second stage of the trade agreement would include IPR issues In other developments on February 6 2020 President Trump announced that the Administration intends to enter into FTA negotiations with Kenya and the Administration provided Congress with a formal notification under TPA on March 17 2020 90 USTR has identified copyright piracy and government use of unauthorized software as issues of concern with respect to Kenya 91 Core Provisions in U S Trade Agreements What follows is a discussion of some of the central patent copyright trademark and other IP commitments in U S FTAs and how they relate to the WTO TRIPS Agreement see “World Trade Organization WTO ” Patents Patent protection is one of the more contentious areas of U S FTA negotiations on IPR issues In the context of pharmaceuticals the United States and other developed countries generally support strong patent rights as necessary to provide incentives for innovation and enable rights holders to recoup R D and regulatory costs and invest in future innovations Some developing countries however maintain that patents may raise the costs of drugs and delay the entry of lower-cost generic competitors into the market leading to concerns about affordability and access to medicines Many FTAs in force include TRIPS-plus patent provisions the most prominent of which are patent term length extensions linkages between regulatory authority and patent rights data protection compulsory licensing and parallel importation The U S FTAs with Peru Panama and Colombia respond to the concerns of some Members of Congress over provisions that could restrict access to medicines in these countries and contain less ambitious standards for pharmaceutical patents compared to previously negotiated FTAs Some key patent provisions in U S FTAs and their evolution are discussed below 92 Patent-Eligible Subject Matter TRIPS NAFTA subsequent U S FTAs and the USMCA have made patents available “for any inventions whether products or processes in all fields of technology provided that they are new involve an inventive step and are capable of industrial application ”93 These agreements generally have also described three exceptions for which a party can exclude from patentability  inventions the prevention of commercial exploitation within their territory of which is necessary to protect ordre public or morality including to protect 89 CRS In Focus IF11120 U S -Japan Trade Agreement Negotiations by Cathleen D Cimino-Isaacs and Brock R Williams 90 USTR “President Trump Announces Intent to Negotiate Trade Agreement with Kenya ” press release February 6 2020 91 USTR 2019 Special 301 Report April 2019 92 For a discussion of pharmaceutical patent provisions in U S law see for instance CRS Report R41483 Follow-On Biologics The Law and Intellectual Property Issues by John R Thomas 93 TRIPS Article 27 1 Congressional Research Service 31 Intellectual Property Rights and International Trade   human animal or plant life or health or to avoid serious prejudice to the environment provided that such exclusion is not made merely because the exploitation is prohibited by their law diagnostic therapeutic and surgical methods for the treatment of humans or animals animals other than microorganisms and essentially biological processes for the production of plants or animals other than non-biological and microbiological processes 94 Most agreements require patents be made available for plant varieties but some allowed the exclusion of plants other than microorganisms Since the 2005 U S -Morocco FTA some agreements have required patent coverage of “new uses or methods of using a known product ” This protection was also included in the Bahrain Oman and South Korea FTAs as well as the USMCA as originally negotiated The FTAs with Morocco Bahrain and Oman also included required patent eligibility for treatments for medical conditions However with respect to the final USMCA the entire provision was dropped in the protocol of amendment POA According to House Ways and Means Committee Democrats the provision would have “locked in the practice of ‘patent evergreening’ in which pharmaceutical companies obtain hundreds of patents related to a product to block generic competition and price reductions ”95 Views are mixed on patent evergreening as another view is that the practice provides patents for new uses and methods of existing products and incentivizes innovations in developing products with new methods of dispensation such as that would avoid a trip to the hospital or a product with fewer side-effects 96 Pharmaceutical Patent Protection in India Since 2012 India has denied or revoked patents for several cancer and hepatitis C drugs developed by Western pharmaceutical companies India’s Supreme Court has decided to prohibit patents for certain chemical forms absent a showing of “enhanced efficacy ” although the products are protected by patents in many other countries Innovator companies often seek patents of modified versions of originally patented products a practice sometimes critically referred to as “evergreening ” India’s patent laws are designed to discourage evergreening by denying a patent unless there is a showing of enhanced efficacy of the reformulated pharmaceutical product USTR argues that patents are appropriate because modifications can provide new benefits such as “fewer side effects decreased toxicity improved delivery systems or temperature or storage stability ” 97 India also has issued or threatened to issue compulsory licenses for pharmaceuticals For example in March 2012 the Indian government issued a compulsory license to an Indian pharmaceutical company to produce a generic version of Nexavar a kidney cancer drug produced by Bayer India defended its decision on the basis that the price for the patented drug was too high for most Indians 98 According to the 2019 Special 301 Report U S companies operating in India continue to be concerned about the potential threat of compulsory licenses and 94 USMCA 20 36 2 some agreements dropped mention of one or more of these exceptions However these exclusions are covered under TRIPS Article 27 2 and 27 3 95 Improvements to the USMCA Factsheet December 10 2019 https waysandmeans house gov sites democrats waysandmeans house gov files documents USMCA%20win%20facts heet%20 pdf 96 For more information the evergreening debate see CRS Report R40917 “Patent Evergreening ” Issues in Innovation and Competition by John R Thomas pp 8-9 available to congressional clients from the author upon request 97 USTR 2015 Special 301 Report p 49 98 “Bayer fails to block generic cancer drug in India’s top court ” Reuters December 12 2014 Congressional Research Service 32 Intellectual Property Rights and International Trade patent revocation as well as what they perceive to be overly broad criteria for these actions under India’s domestic law Term Adjustment for Unreasonable Granting Authority Delays An adjustment to the patent term beyond its 20-year protection period may be provided in cases of “unreasonable delays” by patent-granting authorities e g PTO in issuing patents during the administrative review of patent applications patent examination Such extensions increase the length of time right holders have no generic competition enhancing their ability to recoup R D costs At the same time this increased revenue also represents increased costs to consumers such as by delaying the market entry of presumably lower-cost generic products TRIPS requires patent protection terms of a minimum of 20 years from the filing date It does not require patent term extensions in cases of “unreasonable” delays by issuing authorities but it does obligate members to ensure procedures subject to conditions for granting or registering patent rights within a reasonable period of time 99 Many FTAs include provisions for mandatory patent term length extensions beyond the TRIPS obligation of patent protection terms of twenty years from the filing date U S FTAs provide for extensions in cases of “unreasonable” delays in the issuance of patents due to regulatory review or administrative process that lessen the effective 20-year term of patent protection NAFTA allowed countries to provide such an extension but it did not define an unreasonable period of time The U S -Chile FTA was the first U S FTA to define an unreasonable delay as one “to include a delay in the issuance of the patent of more than five years from the date of filing of the application in the Party or three years after a request for examination of the application has been made 5-3 definition ”100 This level of protection was reprised in the Central American-Dominican Republic DR-CAFTA U S FTAs with Bahrain Oman and South Korea defined “unreasonable” as four years from the date of filing or two years after a request for examination 101 However as a result of the May 10 Agreement U S FTAs with Colombia Panama and Peru made patent term restorations in cases of unreasonable delays for pharmaceutical products optional although it did contain the 5-3 definition of unreasonable in cases such obligations were undertaken At the same time these FTAs require the countries to make “best efforts to process patent applications and marketing approval applications expeditiously with a view to avoiding unreasonable delays ”102 USMCA In contrast USMCA obliges each party to provide the means to a patent holder to adjust the term of a patent due to unreasonable delay and requires each party to do so at the patent holder’s request USMCA returns to the earlier 5-3 definition 103 99 TRIPS Agreement Article 62 2 Chile FTA Article 17 9 6 101 Singapore Australia Morocco Central American-Dominican Republic Bahrain Oman 102 Colombia FTA Article 16 9 6 Panama FTA Article 15 9 6 and Peru FTA Article 16 9 6 with quoted language from Peru FTA 103 USMCA Article 20 44 100 Congressional Research Service 33 Intellectual Property Rights and International Trade Patent Term Extension for Unreasonable Curtailment An adjustment for unreasonable curtailment refers to adjusting for delays on account of the approval process for marketing new pharmaceutical products Unlike most other products manufacturers of pharmaceutical products cannot market them even after a patent is approved The patent holder still needs to show the product is safe and effective to obtain marketing approval from a regulatory authority such as the Food and Drug Administration FDA in the United States This curtailment adjustment would ameliorate some of the time lost in obtaining marketing approval of the drug This provision first appeared in the U S -Jordan FTA and has continued in subsequent FTAs 104 It obligated parties to make available an extension of the patent to compensate for unreasonable curtailment without specifying a time period For the Panama Colombia and Peru FTAs this provision became optional USMCA The USMCA renewed the obligation for parties to make available an extension of the patent to compensate for unreasonable curtailment It also allows for the provision of a sui generis form of protection e g a system not tied to the patent or marketing approval process The POA however permits a party to attach conditions or limitations on this obligation The amended text allows a party to restrict     the applicability of the article to a single extension the adjustment to the first market approval granted length of the extension to five years and the length of additional sui generis protection to two years 105 Patent Linkage Under the concept of patent linkage if a patent currently is valid in a country the pharmaceutical regulatory body of that country i e the counterpart of the FDA may not grant marketing approval for a generic version of that drug without the permission of the rights holder and must notify the rights holder if marketing is permitted Patent linkage arguably strengthens patent protection but may lengthen the time it takes for generic drugs to enter a market once the patent expires Neither TRIPS nor NAFTA contain patent linkage obligations Without them generic drug manufacturers could apply for marketing approval without the patent owner’s permission and prior to the expiration of the patent However such generic manufacturers could still be sued for patent infringement In contrast patent linkage is a common requirement in many U S FTAs beginning with the U S -Chile FTA Patent linkage provisions obligate the parties to   notify the patent holder of any third party requesting marketing approval effective during the term of the patent 106 and deny marketing approval to any third party prior to the expiration of the patent except with the consent of the patent owner 107 104 U S Jordan FTA Article 4 23 a USMCA Article 20 46 fn 40 106 This provision began with the U S -Jordan FTA Article 4 22 107 For example see U S -Chile FTA Article 17 10 2 105 Congressional Research Service 34 Intellectual Property Rights and International Trade The Colombia Peru and Panama FTAs reflected the policy changes of the May 10 Agreement which sought to delink marketing approval from patent enforcement The previous two principles became optional and were joined if applied by the following obligations for a party to provide  “expeditious” administrative or judicial procedures to challenge the validity or applicability of a patent and  “effective” rewards to encourage the successful challenge to the validity or applicability of a patent 108 USMCA As originally negotiated the patent linkage provision of the USMCA reverted back to the pre-May 10 standard which prioritized enforcement of the patent and the ability to prevent generics from obtaining market approval prior to challenging the validity of the patent Under the POA and in contrast to the May 10 FTAs a party may provide for effective rewards for challenging the validity of a patent A footnote to this provision suggests providing a period of marketing exclusivity to the first applicant that successfully asserts the invalidity or non-infringement of the patent as a potential reward Also in contrast to the May 10 FTAs a party may provide “Procedures…to promote transparency by providing information regarding applicable patents and relevant periods of exclusivity for pharmaceutical products that have been approved in that Party ” This language differs from the obligation to provide “expeditious administrative or judicial remedies” to challenge the validity of a patent per the language of the Colombia Panama and Peru agreements 109 Protection of Test Data Data exclusivity provides a period of protection for test data110 that prevents a generic company from relying on an innovator company’s test data in order to gain marketing approval for a generic version of a brand name drug During the data exclusivity period the generic company would have to submit its own safety and effectiveness data with new drug trials to get regulatory approval Since clinical trials and other testing data submitted for marketing approval can be costly and take years to develop test data protection provides an incentive for innovation At the same time such provisions may delay access to generic forms of drugs See Figure 4 In cases in which the patent holders must submit undisclosed data regarding the safety or efficacy of new pharmaceutical or agricultural products such as data from clinical trials in order to obtain marketing approval TRIPS requires members to take measures to protect such data from disclosure and unfair commercial use and this requirement was reaffirmed in the U S -Jordan FTA 111 NAFTA further stipulated that such data could not be relied upon to support an application for marketing approval for a reasonable period of time which was defined as “normally …not less than five years” following the approval of the product by the producer of the 108 For example see U S -Colombia FTA Article 16 10 4 In the United States new drug manufacturers must list patents that claim the drug or a method of using that drug as part of their application for FDA approval FDA includes information on listed patents in a publication known as the Orange Book See CRS In Focus IF11214 Drug Pricing and the Law Pharmaceutical Patent Disputes by Kevin J Hickey 110 Test data is information generated on the safety or effectiveness of new pharmaceutical products for example through clinical trials by pharmaceutical companies that are submitted to regulatory authorities such as the FDA 111 TRIPS Article 39 3 U S -Jordan FTA Article 4 22 109 Congressional Research Service 35 Intellectual Property Rights and International Trade data 112 For new chemical drug products all subsequent U S FTAs including USMCA provided this minimum five-year period of data exclusivity which typically begins from the date of marketing approval in the country Beginning with the Singapore FTA a party that provides a means of granting marketing approval based on the approval of the product in another country is required to defer approval for five years as well 113 The U S -Singapore FTA also began the inclusion in FTAs of a provision that would prevent data from being used for the full five years even if it outlasted the patent term 114 In addition for the submission of new clinical information that includes a chemical entity previously approved for another pharmaceutical product new uses for known products the U S Australia FTA began to require a minimum three-year period of data exclusivity for that data which typically begins from the date of marketing approval in the country 115 Because the required availability of patent protection for new uses of a chemical entity previously approved for another use was removed in USMCA see above this companion period of data exclusivity was removed as well The Colombia Panama and Peru FTAs maintained five years of data exclusivity for test data related to new chemical products However they also included other provisions that may reduce the data exclusivity term by a minimum of six months in practice If the FTA country relies on marketing approval granted by the FDA and grants approval within six months of an application for marketing approval by a person that produced the data then the five-year period begins in the FTA country when the drug was first approved in the United States oftentimes called the “concurrent period” 116 As such the data exclusivity period in the FTA country could run as long as the U S data exclusivity period but no longer The three-year data exclusivity period for previously approved chemical entities became optional 117 Regulatory Exclusivity for Biologics Biological products “biologics” are “large molecule” medical preparations derived from living organisms Examples include vaccines blood and blood components and therapeutic proteins Biologics are a relatively new area of pharmaceutical R D 118 By contrast “small molecules” chemical formulations traditionally have been the active substances in most pharmaceutical drugs Data exclusivity has a special significance for biologics Since biologics are based on unique cell lines or biological processes they cannot be replicated as generics as easily and inexpensively by relying on the originator product’s efficacy and safety test data as is the case for traditional small molecules-based medicine Rather regulatory agencies require more costly clinical trials to approve “biosimilars ”119 U S law provides a 12-year period of data exclusivity for biologics 112 NAFTA Article 17 11 6 Singapore FTA Article 16 8 2 114 Singapore FTA Article 16 8 3 115 Australia FTA KORUS FTA Article 18 9 1 and Article 18 9 2 116 For example Peru FTA Article 16 10 2 c 117 Peru FTA Article 16 10 2 118 CRS Report R44620 Biologics and Biosimilars Background and Key Issues by Agata Dabrowska 119 World Health Organization WHO WTO and WIPO Promoting Access to Medical Technologies and Innovation Intersections Between Public Health Intellectual Property and Trade 2012 p 52 113 Congressional Research Service 36 Intellectual Property Rights and International Trade Data exclusivity protection of biologics has been an increasing area of focus in trade negotiations The United States first sought an additional period of exclusivity in the TPP negotiations although other members were unwilling to accept the 12-year proposal from the United States 120 While the United States typically bases its proposals on existing U S law it only sought a 10year period of exclusivity in the USMCA Although this level of protection was included in the USMCA as originally negotiated the POA removed the exclusivity period for biologics entirely a controversial decision that led innovator pharmaceutical groups to withdraw support from the agreement 121 Canada currently provides a total of eight years of biologics exclusivity while Mexico provides a five-year exclusivity period for both small-molecule drugs and biologics 120 TPP contained a 5-year period of exclusivity with the potential for an additional three years Following the U S withdrawal the other TPP members suspended this provision as well 121 See Pharmaceutical Research and Manufacturers of America PhRMA Press Release December 19 2019 https phrma org en Press-Release PhRMA-Statement-on-the-United-States-Mexico-Canada-Agreement-2019 and Biotechnology Industry Association BIO Press Release December 19 2019 https www bio org pressrelease usmca-missed-opportunity-create-positive-framework-leading-sector-21st-century Congressional Research Service 37 Intellectual Property Rights and International Trade Figure 5 Different Scenarios for Data Exclusivity and Patent Protection Source CRS reproduction of figure from Government Accountability Office GAO Intellectual Property U S Trade Policy Guidance on WTO Declaration on Access to Medicines May Need Clarification GAO-07-1198 September 2007 Parallel Importation Parallel imports also known as grey-market goods refer to goods imported into a country without permission of the rights holder after those goods were legitimately sold elsewhere Parallel importation relates to the concept of territorial exhaustion of IPR which governs the extent of IPR after the first sale In many countries IPR are exhausted at the first sale for any destination and such goods can be exported or re-exported freely 122 Some developing countries contend that parallel importation is an alternative method for governments to increase access to medicines in the absence of a compulsory license 123 This practice also has implication for the importation of generic drugs into the United States Pharmaceutical companies have voiced 122 For a discussion of patent exhaustion in U S law see CRS Report R44962 Patent Law A Primer and Overview of Emerging Issues by Kevin J Hickey 123 U S Government Accountability Office U S Trade Policy Guidance on WTO Declaration on Access to Medicines May Need Clarification GAO-97-1198 September 2007 p 19 Congressional Research Service 38 Intellectual Property Rights and International Trade concerns that this practice threatens their ability to engage in price differentiation between different markets Article 6 of TRIPS specifically excludes issues arising from exhaustion of IPR from WTO dispute settlement allowing each member to adopt different exhaustion regimes Thus TRIPS does not address the issue of parallel imports U S FTAs negotiated with Australia Singapore and Morocco disallow parallel importing of patented products 124 Subsequent U S negotiated FTAs have not included this provision due to language included in the Science State Justice and Commerce and Related Agencies Appropriations Act of 2006 P L 109-108 which prohibited the use of such provisions Copyright In the area of copyright protection the United States has pursued certain TRIPS-plus measures in FTAs such as extending copyright terms including anti-circumvention provisions and protecting rights-management information in its FTAs The TRIPS Agreement and NAFTA do not mention any obligations regarding technological protection measures or rights-management information which is electronic information that identifies a protected work its author and terms and conditions of use 125 due to the fact these technologies were not available at the time In contrast U S -negotiated trade agreements prohibit the removal or alteration of such information 126 While patent protection has experienced policy shifts in the FTAs over the years copyright protection provisions have remained fairly consistent In general U S FTA signatories are obligated to provide an additional twenty years of copyright protection from the TRIPS NAFTA standard of 50 years after death of the author bringing the minimum copyright term to seventy years from the death of the author Responding to technological innovations not contained in the TRIPS Agreement U S FTAs since the U S -Jordan FTA require trading partners to outlaw circumvention of “effective technological measures” to protect access to copyrighted works 127 USMCA was the first U S FTA specifically to distinguish technological protection measures128 from rights management information 129 while providing similar levels of protection for each These provisions build on the U S Digital Millennium Copyright Act DMCA of 1998 130 Also based on the DMCA U S FTAs since the U S -Chile FTA contain provisions that regulate the liability of Internet service providers ISPs for copyright infringement that occurs within their networks 131 Under the FTAs ISPs are provided limited immunity from copyright liability in certain kinds of infringing situations if they comply with regulations known as notice-and takedown provisions Under the notice-and-takedown process ISPs must block access to or remove infringing materials as soon as they are made aware of the infringement by the rights holder although ISPs users may file a counter-notice to restore material if they believe it is noninfringing Copyright holders argue that it is necessary for ISPs to assist in enforcing copyright if copyright laws are to be effective in the online context However critics claim that these 124 See for example U S -Australia Article 17 9 4 For a statutory definition of copyright management information see 17 U S C 1202 c 126 For example USMCA Article 20 66 Article 20 67 127 U S -Jordan FTA Article 4 13 128 USMCA Article 20 67 TPMs are technology or devices that limit or block access to a work to prevent copyright infringement 129 USMCA Article 20 68 RMI identifies the author of a digital work and the terms and conditions relating to its use 130 The DMCA P L 105-304 prohibits disabling technological protection measures designed to protect copyright works through activities such as descrambling or decrypting copyrighted works 131 U S -Chile Article 17 23 current provisions in USMCA Article 20 89 125 Congressional Research Service 39 Intellectual Property Rights and International Trade provisions impose excessive burdens on ISPs reduce the rights of internet users and limit the policy flexibility of FTA signatories in determining their own IPR regimes USMCA For the most part USMCA follows the standard copyright provisions found in U S FTAs noted above Among the outcomes in the USMCA    Extension of copyright terms NAFTA alone among U S FTAs contained the TRIPS 50-year standard USMCA extends copyright terms from 50 years after death of the author or 50 years from the publication to 70 years after the death of the author or publication In addition it increased the term of protection for works from other than a natural person such as works made for hire to 75 years from the year of the first authorized publication Among the USMCA parties only Canada maintained the 50-year term Limitation and Exceptions Confines “limitations and exceptions” to “certain special cases that do not conflict with the normal exploitation of the work…and do not unreasonably prejudice the legitimate interests of the rights holder ” The USMCA does not contain additional language that was in the TPP to “endeavor to achieve an appropriate balance” between users and rights holders in their copyright systems including digitally through exceptions for legitimate purposes e g criticism comment news reporting teaching research The “appropriate balance” language speaks to fair-use exceptions in copyright law for media research and teaching Rights-holder groups have criticized such provisions in the FTA context while open internet groups have sought to have the fair-use provision inserted into the proposed USMCA ISP “Safe harbor ” Protects ISPs against liability for digital copyright infringement provided that ISPs address intermediary copyright liability through “notice and takedown” or alternative systems e g “notice and notice” in Canada Rights-holder groups sought to limit what they considered “overly broad safe harbor provisions ” while technology and business groups favored retention Trade Secrets A company’s ability to protect its commercially valuable proprietary information may affect its competitiveness or even its survival Such proprietary information can include blueprints chemical and other production processes marketing strategies or sales information According to a 2014 survey by the ITC of more than 7 000 firms 56% of internationally engaged firms considered trade secrets “very important ”132 The USTR’s 2019 Special 301 Report described the continued need for international protection and enforcement of U S trade secrets citing the threat to U S competitiveness and risks to national security from the theft of U S trade secrets The report highlights concern about inadequate protection and enforcement of trade secret law in certain countries Companies are reportedly increasingly victimized by outright theft of their trade secrets and have decried the often lax remedies available to combat such theft Trade secret theft has taken on new and increased complexities in the digital environment and the United States is increasingly concerned about trade secret theft through cybercrime Penalties for trade secret theft vary widely among countries some countries have no penalties at all while others have civil remedies or criminalize Katherine Linton “The Importance of Trade Secrets New Directions in International Trade Policy Making and Empirical Research ” USITC Journal of International Commerce and Economics September 2016 132 Congressional Research Service 40 Intellectual Property Rights and International Trade trade secret theft that results from computer hacking In the United States remedies for trade secret theft primarily are found in state law although criminal and civil remedies are also available under federal law The USMCA is the first U S trade agreement since NAFTA to contain new provisions on trade secrets 133 NAFTA required each party to provide the legal means for a person to prevent trade secrets being disclosed without the consent of the person lawfully controlling the information 134 Subsequently TRIPS language on “protection of undisclosed information” was derived from NAFTA 135 NAFTA also prohibited limiting the duration of trade secret protection or discourage or impede the voluntary licensing of trade secrets USMCA In addition to the NAFTA language above USMCA also requires each party to make available civil protection and criminal enforcement136 and penalties for unauthorized and willful misappropriation of trade secrets However it allows each party to determine the applicability of its procedures among at least one of the following    for the purposes of commercial advantage or financial gain related to a product or service in national or international commerce or intended to injure the owner of that trade secret 137 The other new feature of the USMCA trade secrets section is its prohibition on unauthorized disclosure of trade secrets by government officials in a legal or regulatory capacity outside the scope of their official duties 138 Trademarks NAFTA defined trademarks as “any sign or any combination of signs capable of distinguishing the goods or services of one person from those of another including personal names designs letters numerals colors figurative elements or the shape of goods or of their packaging ”139 In addition NAFTA defined trademarks to include service marks and collective marks marks denoting organizations such as associations unions or cooperatives and may include certification marks goods or services or providers have met certain standards With a few variances recognition of collective and certification marks are required in U S FTAs The United States has used subsequent FTAs to include sound and scent marks in trademark protection While NAFTA allowed parties to restrict trademarks to signs that are “visually perceptible ” the U S -Singapore FTA and subsequent agreements prohibited countries from requiring marks to be visually perceptible The U S -Chile FTA was the first agreement to require trademarks for sound marks and that requirement has been replicated in subsequent agreements 140 The United States has had less success in requiring scent marks U S FTAs with Chile Panama and the DR-CAFTA countries 133 USMCA Section I NAFTA Article 17 10 135 TRIPS Article 39 136 TPP from which the United States withdrew contained provisions criminalizing trade secrets 137 USMCA Article 20 71 138 Ibid Article 20 78 139 NAFTA Article 1708 1 140 U S -Chile FTA Article 17 2 134 Congressional Research Service 41 Intellectual Property Rights and International Trade provide that countries may include scent marks 141 More common is the language “neither party may deny registration solely on grounds of sounds and scents ” which appears in the FTAs with Australia Bahrain Colombia Oman Peru and South Korea 142 Singapore and USMCA require each party to make “best efforts” to register scent marks 143 U S FTAs generally including the USMCA provide for  a term of registration of no less than 10 years with the opportunity for 10-year periods of renewal indefinitely144 whereas TRIPS requires a seven-year term and seven-year renewals  protection of well-known marks whether registered or not for goods and services for which they have gained their reputation that protection may also be protected for dissimilar goods and services provided a connection exists with the goods and services of the owner 145 the maintenance of a trademark classification system consistent with the Nice Agreement Concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks 146 limited exceptions such as fair use for descriptive terms and appropriate measures to refuse an application or cancel a registration and prohibit the use of a trademark that is identical or similar to a well-known trademark by administrative procedures    NAFTA contained several provisions that have not appeared in subsequent U S FTAs 147 However these elements were incorporated into the TRIPS Agreement They stipulated that  use of a trademark is not a prerequisite for filing an application for registration although parties may make registration dependent on use   publication of each trademark must occur before registration or promptly after parties shall require the use of a trademark to maintain a registration and that a trademark may be cancelled after two years of non-use an owner of a registered trademark may assign the trademark without the transfer of the business to which it belongs parties shall recognize use of a trademark by a person other than the trademark owner where such use is subject to the owner’s control as use of the trademark for purposes of maintaining the registration compulsory licensing of trademarks is not allowed and the nature of the goods or services to which a trademark is to be applied shall in no case form an obstacle to the registration of the trademark     141 For example U S -Chile FTA Article 17 2 For example U S -Australia FTA Art 17 2 2 143 For example USMCA Article 20 17 144 USMCA Article 20 25 145 Ibid Article 20 21 146 USMCA Article 20 24 147 NAFTA Article 1708 142 Congressional Research Service 42 Intellectual Property Rights and International Trade Internet Domain Names NAFTA was negotiated before the widespread use of the internet and does not contain language on internet governance The U S -Chile and U S -Singapore FTAs were the first to contain language on domain names which have been largely retained in subsequent U S -FTAs including USMCA 148 They require each party’s country-code top-level domain ccTLD organization to   provide procedures to settle disputes based on principles established in the Internet Corporation of Assigned Names and Numbers’ ICANN Uniform Domain-Name Dispute-Resolution Policy UDRP 149 in order to address and resolve disputes related to the bad-faith registration of domain names in violation of trademarks and provide a reliable and accurate database of contact information of domain name registrants Geographical Indications GIs GIs are geographical names that protect the quality and reputation of a distinctive product from a specific region e g Parma ham Florida oranges U S FTAs contain provisions on geographical indications in its IPR chapters either freestanding or as part of the trademark section For example the trademark chapter requires that signs e g brand logos may serve as a geographical indication In FTA negotiations the United States has sought to limit GI protections that from the U S perspective can improperly constrain U S agricultural market access in other countries by protecting terms it views as “common ” USMCA defines a geographical indication as an indication that identifies a good as originating in the territory of a Party or a region or locality in that territory where a given quality reputation or other characteristic of the good is essentially attributable to its geographical origin 150 Some previous agreements elaborated on the definition to include Any sign or combination of signs such as words including geographical and personal names letters numerals figurative elements and colors in any form whatsoever shall be eligible for protection or recognition as a geographical indication 151 GIs as Trademarks Generally U S FTAs have152 either required parties to recognize GIs as trademarks or provide that parties may recognize GIs as trademarks or may be considered as certification marks eligible for trademark protection NAFTA and the U S -Morocco FTA only required each party to provide owners remedies for GI infringement but they do not specifically refer to GIs’ eligibility for trademark protection 153 USMCA requires only that “geographical indications may be protected through a trademark or a sui generis system or other legal means ”154 148 For example U S -Chile Article 17 3 Some agreements explicitly require participation in ICANN 150 USMCA Article 20 1 151 For example Article 16 2 2 fn 4 152 Some agreements explicitly require participation in ICANN 153 NAFTA Art 17 2 Morocco Art 15 2 4 154 USMCA Article 20 29 149 Congressional Research Service 43 Intellectual Property Rights and International Trade Administrative Procedures Most U S FTAs require parties to provide a means to apply or petition for protection or petition for recognition of a geographical indication and that the process adhere to certain norms and procedures USMCA provides that if a party provides these administrative procedures they must adhere to certain standards which usually have appeared throughout U S FTAs Parties shall  accept the application or petition without requiring intercession by a Party on behalf of its nationals   process those applications without imposing burdensome formalities ensure the laws and regulation concerning GI application is readily available to the public and provide contact information on the filing and administrative process concerning the application process and status of an application 155  More recent FTAs provide that these guidelines for administrative procedures outline the process for opposing applications or petitions as well USMCA goes further by not only ensuring applications are published for opposition and procedures to oppose an application but also to     provide a reasonable period of time for an interested person may oppose the application require that administrative decisions in opposition proceedings be reasoned and in writing which may be provided by electronic means provide for cancellation of the protection or recognition afforded to a geographical indication and require that administrative decisions in cancellation proceedings be reasoned and in writing which may be provided by electronic means 156 Opposition Denial Cancellation GI provisions in U S FTAs also include grounds for denial opposition or cancellation Earlier U S FTAs provided two specific justifications refusing protection   GI is confusingly similar to a preexisting pending good faith application for a trademark or a preexisting trademark registered in that Party or GI is confusingly similar to a preexisting trademark the rights to which have been acquired in accordance with the parties’ law 157 The U S -Korea FTA KORUS added a third justification for refusing protection of a GI that is likely to cause confusion with a trademark that has become well known in the party’s territory 158 USMCA replaces the additional KORUS justification to refuse protection for a term customary in common language as the common name for the relevant good in the territory of the Party 159 USMCA also sets out guidelines as to whether a term is the customary term for a good in common language 155 Ibid Article 20 30 Ibid 157 For example DR-CAFTA Article 15 3 7 158 KORUS Article 18 2 15 a iii 159 USMCA Article 20 31 1 c 156 Congressional Research Service 44 Intellectual Property Rights and International Trade USMCA is the first U S FTA to include applicable procedures if a party protects or recognizes a GI pursuant to an international agreement This section may reflect the GIs recognized through FTAs Canada has signed with Canada and Mexico The provisions largely track the notification transparency and opposition procedures above New and Evolving Issues U S trade policy is increasingly focused on addressing new and evolving issues in international IPR protection and enforcement The IPR landscape is changing due to both the growing role of emerging markets in the global marketplace and the increased level of international trade taking place in the digital environment Indigenous Innovation “Indigenous innovation” is a term and government industrial policy approach developed and deployed in China and other countries including India These policies generally aim to build out and advance China and other countries’ science and technology research and development and industrial capabilities through discriminatory and protectionist policies These policies commonly require foreign companies to localize operations in the country and force transfer of advanced proprietary IP and know-how to local domestic companies and government entities in an effort to develop “indigenous” capabilities The policies also involve promoting innovation from domestic companies rather than relying on foreign technology building domestic R D capabilities more broadly and increasing the share of overall value added by domestic companies to the domestic economy Such innovation policies can surface in areas such as government procurement technical standards and technology transfer 160 For example indigenous innovation policies may require the transfer of technology as a condition for allowing access to a market or for a company to continue to do business in the market 161 While the goal of increasing domestic manufacturing and innovation is acknowledged the U S government industry groups and other stakeholders express concern that indigenous innovation policies are discriminatory and unfairly disadvantage U S right holders in those countries and also may potentially violate WTO rules and disciplines China’s indigenous innovation policies for example have been a source of trade tension with the United States Localization Barriers to Trade Functioning as a type of nontariff barrier to market access “forced” localization measures generally refer to those designed to protect favor or stimulate domestic industries service providers or intellectual property at the expense of foreign counterparts Localization barriers can take a number of forms such as requirements for  service providers to process data in the foreign country as a condition of market access  businesses to transfer technology and intellectual property as a condition of approval of foreign investments or The term “indigenous innovation” can be tied to China’s Medium- to Long-term Plan for the Development of Science and Technology often referred to as the MLP which calls for China to become an “innovation-oriented society” and a global leader in science and technology 161 U S International Trade Commission China Effects of Intellectual Property Infringement and Indigenous Innovation Policies on the U S Economy Investigation No 332-519 USITC Publication 4226 May 2011 160 Congressional Research Service 45 Intellectual Property Rights and International Trade  firms to use local content as a condition for manufacturing or government procurement For example with respect to India U S businesses often cite localization requirements for data and servers as limiting market access and constraining innovation in the ICT sector 162 In China transfer of technology policies require localization in a range of sectors such as medical equipment electric vehicles and information technology While some localization barriers may serve data privacy or security objectives concerns have arisen that some of these measures can be economically distorting According to USTR these measures can distort trade inhibit FDI and lead other countries to follow suit 163 Certain localization barriers have been addressed in multilateral trade negotiations For instance the WTO Agreement on Trade-Related Investment Measures TRIMs prohibits “local content” requirements imposed in a discriminatory manner with respect to foreign investment 164 Each of the above types of localization barriers are addressed in the USMCA which prohibits forced technology transfer data localization requirements and local content rules Biodiversity and Traditional Knowledge International trade negotiations increasingly have focused on the protection of inventions derived from plants and animals new plant varieties traditional knowledge and folklore Some indigenous communities in developing countries and international non-governmental organizations have expressed concern about the use of patents to provide private rights for traditional knowledge and genetic material They also worry about the commercial use of such resources by entities other than the indigenous communities or countries from which such resources are derived and the distribution of benefits from commercial use The United States other advanced countries and business groups favor treating traditional knowledge and genetic material as eligible for intellectual property protection Article 27 3 b of the TRIPS Agreement permits Member states to exempt “plants and animals other than micro-organisms and essentially biological processes” from patentability TRIPS requires Members to protect plant varieties through patent protection a sui generis system or a combination of the two Paragraph 19 of the Doha Declaration added another dimension to the issue by requiring the TRIPS Council to probe the relationship between the TRIPS Agreement the UN Convention on Biological Diversity CBD and traditional knowledge and folklore These issues also are being discussed in WIPO’s Intergovernmental Committee on Intellectual Property and Genetic Resources Trade Knowledge and Folklore Some earlier U S FTAs required signatories to provide protection for plants animals and plant varieties in their IPR chapters FTAs with Peru Panama and Colombia do not mandate patentability for plants and animals but state that the countries should take efforts to expand patent coverage to these areas and to maintain this protection once it is offered Side-letters in these FTAs recognize the importance of biodiversity and traditional knowledge and pledge the countries to work together to address these issues USMCA allows for parties to exclude animals and plants other than microorganisms from patentability but that patents are available for 162 USTR 2015 Special 301 Report p 23 USTR 2015 National Trade Estimate Report on Foreign Trade Barriers March 2015 pp 2-3 164 As defined by USTR “local content” requirements are requirements to purchase domestically manufactured goods or domestically supplied services 163 Congressional Research Service 46 Intellectual Property Rights and International Trade inventions derived from plants 165 USMCA recognizes the importance of biodiversity in the Environment chapter Issues for Congress Congress has legislative oversight and appropriations responsibilities related to IPR and trade policy What follows are certain key issues that Congress could consider as it fulfills those responsibilities U S Efforts to Promote IPR Through Trade Policy Since the inclusion of IPR provisions in NAFTA and the TRIPS Agreement IPR protection and enforcement have been major U S trade policy negotiating objectives Alongside the growing role of IPR in trade policy there has been an ongoing debate regarding the appropriateness of linking IPR and trade policy From one perspective IPR could promote trade through innovation economic growth and technology transfer from advanced to developing countries From another perspective IPR which grant legal temporary monopolies to rights holders for their creations could be considered barriers to trade that have no place in trade liberalization negotiations Given the continued use of trade policy to advance IPR objectives debates also have focused on the appropriate balance between the protection and enforcement of IPR and other public policy objectives such as access to medicines and the free flow of information as well as the extent to which these goals are complementary or conflicting Additionally there have been debates about the trade policy channels used by the United States to promote IPR goals Some question the appropriateness of using regional and bilateral FTAs for pursuing stronger IPR contending that such actions take away from the effectiveness of multilateral IPR promotion efforts Others argue that strong IPR commitments in U S regional and bilateral FTAs can provide momentum for developing such disciplines at the multilateral level In light of the Administration’s imposition of Section 301 tariffs on China and the limited treatment of IPR in the phase one deal struck between the United States and China another issue Congress may consider is whether the use of Section 301 is an effective strategy to address IPR issues Another issue facing Congress is whether current U S trade negotiations comply with TPA objectives and congressional expectations Congress may debate whether the results of the USMCA particularly on pharmaceutical patents and exclusivity periods are consistent with the TPA negotiating objective that agreements “reflect a standard of protection similar to that found in U S law ” The alternative is that USMCA’s IPR provisions represent a new paradigm for IPR chapters in future trade agreements such as the newly announced negotiations for an FTA with Kenya In addition Congress may also consider whether partial trade liberalization such as the agreement with Japan and negotiations with India and the European Union sufficiently consider IPR issues Congress may use a possible renewal of TPA to reaffirm and or change U S trade negotiating objectives on IPR for future U S trade agreements The current TPA expires on June 30 2021 Congress may reassert current negotiating objectives to provide strong enforcement of IPR in trade agreements and to press for the elimination of government violations of IPR It may also add new objectives or make adherence to existing objectives a criterion for initiating trade negotiations 165 Article 20 36 3 and 4 Congressional Research Service 47 Intellectual Property Rights and International Trade Enforcement of IPR Commitments The extent to which U S FTA partners and WTO members are upholding their IPR commitments is of congressional concern To date the United States has concluded 14 FTAs with 20 countries Some business observers argue that negotiating high-standard FTAs is not enough and that “FTA commitments are meaningless if they are not consistently implemented and effectively enforced over time ”166 Questions include whether existing U S trade policy tools such as the “Special 301” process bilateral consultations and WTO and FTA dispute settlement mechanisms are effective in bringing countries into IPR compliance Aspects of these processes are subject to debate For example one question is whether “Special 301” designations are balanced in assessing countries’ IPR regimes Supporters contend that the Special 301 country designations—determined on a case-by-case basis and relying on interagency deliberations and consultations with Congress foreign governments and other stakeholders—accurately reflect countries’ inadequacies in their IPR regimes Others argue that the Special 301 is overly industry-driven and that country designations are not determined systematically Congress may examine whether there are additional opportunities for seeking redress for violations of TRIPS Agreement commitments through the WTO Dispute Settlement Mechanism The United States has been a complainant in 18 of 42 WTO disputes concerning the TRIPS Agreement and has been a respondent in four more Two U S cases have been filed since 2000— against China in 2007 and 2018 described above Congress may wish to consider the criteria by which USTR initiates cases or evaluate the resources that may be necessary to investigate and bring additional cases Some stakeholders also call for the United States to pursue greater trade enforcement action on IPR with respect to other countries 167 In addition Congress could explore other options for advancing U S IPR trade policy objectives including in the following areas  Bilateral Investment Treaties BITs Through the negotiation of BITs the United States seeks to reduce barriers to foreign investment and strengthen protections for foreign investment 168 The U S Model BIT the template the United States uses to negotiate BITs and investment chapters of FTAs treats IPR as a covered form of investment subject to protections Previously the United States was negotiating BITs with China and India but progress on these 166 U S Chamber of Commerce Implementation of IP Obligations in U S Trade Agreements An Assessment of U S Agreements with Australia Canada Chile and Korea November 2014 p 17 This study sought to provide an “initial assessment of whether U S FTA partners are abiding by their IP commitments ” It focused on Australia Canada Chile and Korea countries that it characterized as “regionally and economically diverse ” Examining implementation of certain IPR commitments the study found “positive implementation developments and challenges across all four countries ” According to the study Australia has most successfully implemented its FTA obligations with South Korea a “close second” noting that since KORUS is the newest U S FTA to enter into force “it is too early to tell whether Korea is faithfully implementing all of its obligations ” It found that Chile and Canada “lag significantly” behind Australia and Korea in terms of implementation of IPR commitments See Executive Summary of report 167 Currently the fate of WTO dispute settlement system is unclear Since 2016 as a response to dissatisfaction with the function of the Appellate Body AB the United States blocked the appointment of new AB members As of December 2019 the AB has lacked a quorum to hear new cases and existing appeals and the ability of WTO members to enforce WTO agreements are in limbo See CRS In Focus IF10645 Dispute Settlement in the WTO and U S Trade Agreements by Ian F Fergusson 168 See CRS Report R43052 U S International Investment Agreements Issues for Congress by Shayerah Ilias Akhtar and Martin A Weiss U S BITs provide investment protections through provisions such as requirements for nondiscriminatory treatment protections against expropriation and the right to neutral binding arbitration to resolve disputes investors and host countries Congressional Research Service 48 Intellectual Property Rights and International Trade   negotiations was constrained by differences in approaches Congress could examine the progress of these negotiations including how IPR issues are being addressed Should these BIT negotiations be concluded they would be subject to Senate ratification in order to enter into force Tariffs As noted above Section 301 authorizes USTR to investigate and take action against U S trading partners that violate trade agreements or act in an “unjustifiable” or “unreasonable” manner to burden U S commerce USTR has used this authority to counter China’s forced technology transfer and IPR practices through the imposition of tariffs on Chinese goods While Congress does not have a direct role in this process it could recommend the use of Section 301 as a counter to IPR practices of other nations Tariffs are one of many policy tools that can be deployed under Section 301 Congress could explore the other U S policy tools that have not yet been employed under Section 301 to address Chinese industrial policies and IP abuses–tools such as restrictions on Chinese investment and other commercial activities in the U S economy U S trade preference programs Some stakeholders point to U S trade promotion and preference programs as a potential tool for Congress to encourage policy reform in emerging economies Should Congress take up GSP reauthorization beneficiary countries may be subjected to heightened scrutiny over their IPR enforcement Effectiveness of the U S IPR Organizational Structure A range of U S government agencies have responsibilities related to U S IPR activities Some Members of Congress private sector representatives and other stakeholders express concern about whether the present U S IPR organizational structure is doing enough to enforce foreign countries’ IPR obligations as well as whether the structure is capable of doing more See Appendix A for more detail on U S agencies involved with IPR One set of issues centers on coordination Given the range of federal agencies involved in IPR protection and enforcement questions have emerged about whether federal IPR activities are sufficiently coordinated in the present U S IPR organizational structure On one hand the Administration’s establishment of various interagency bodies related to IPR such as the Intellectual Property Enforcement Coordinator IPEC National Intellectual Property Rights Coordination Center IPR Center and ICTIME affirms the U S commitment to enforcing IPR and the importance of interagency coordination On the other hand there are debates about whether the various IPR-related interagency coordinating mechanisms overlap From one perspective these interagency bodies focus on differing aspects of IPR protection and enforcement and in doing so collectively help to advance U S IPR goals in trade policy From another perspective the existence of multiple interagency coordinating bodies can contribute to additional bureaucracy Another set of issues centers on federal resources for IPR protection and enforcement While protection and enforcement of IPR is a stated trade policy priority for the United States it is difficult to get a sense of the magnitude of federal funding and resources devoted to it Some U S government agencies do not have a separate budgetary line item for IPR-related activities and Congress does not always designate specific funds for IPR activities in its appropriations for agencies Additionally information is limited on the economic and other impacts of piracy and counterfeiting on the United States This may complicate the ability of lawmakers to weigh the threat of IPR infringement against the federal resources available for IPR and other government priorities Furthermore there could be debates about whether attempts to enhance interagency Congressional Research Service 49 Intellectual Property Rights and International Trade coordination without devoting greater resources to IPR enforcement activities may translate into greater U S IPR enforcement Looking Forward U S efforts to protect and enforce IPR through U S trade policy are likely to continue to be of interest for Congress The reliance on IPR as a competitive advantage to drive an innovative U S economy is reflected in U S trade policy Congress may set the course of that policy concerning IPR through the development of negotiating objectives in any future trade promotion authority It may evaluate the IPR provisions in the new USMCA as to whether they should become the template for future trade agreements It may weigh the balance between greater intellectual property rights in free trade agreements and the ability to conclude agreements containing such provisions with other countries It may examine how to incorporate the IPR aspects of new issues such as digital trade in U S policy Congress may also examine the enforcement of U S IPR through existing trade agreements as well as the effectiveness of U S trade policy tools such as Special 301 Congressional debates may continue in areas such as how IPR protection and enforcement relate to other public policy goals such as access to affordable medicines The organizational structure for IPR protection and the priority to place on such enforcement when allocating budgetary resources also may be of congressional interest Congressional Research Service 50 Intellectual Property Rights and International Trade Appendix A Overview of IPR-Related U S Government Agencies and Coordinating Bodies What follows is a discussion of key U S government agencies and coordinating bodies involved in U S efforts to protect and enforce IPR Office of the United States Trade Representative USTR The USTR is the lead U S trade negotiator and negotiates IPR provisions in U S trade agreements at the multilateral plurilateral regional and bilateral levels It also enforces U S rights under existing trade agreements Additionally through its annual Special 301 Report USTR is charged with monitoring the adequacy and effectiveness of IPR protection of the nation’s trading partners as well as their compliance with bilateral and multilateral trade agreements identifying countries not in compliance with such agreements and negotiating with those countries to improve compliance The USTR further administers the Generalized System of Preferences GSP program under which a country’s eligibility for U S trade preferences may be contingent on its IPR protection Department of Commerce Commerce Two agencies within the Department of Commerce the Patent and Trademark Office and the International Trade Administration address IPR issues 169   The Patent and Trademark Office PTO administers the U S laws pertaining to patents and trademarks It processes patent and trademark applications issues patents and registers trademarks considers petitions challenging patent validity and conducts post grant reviews The PTO develops IPR protection and enforcement policy and collaborates with other agencies to develop intellectual property provisions in FTAs and other international agreements Additionally the PTO offers training technical assistance and trade capacity building programs to assist in promoting strong IPR regimes in foreign countries through its IP Attaché Program 170 The PTO does not have jurisdiction over determining patent and trademark infringements such determinations and remedies are made at the U S federal district court level or through the ITC’s Section 337 proceedings The PTO is fully funded through fees generated from patent and trademark applications The International Trade Administration ITA administers many of the international trade programs of the Department of Commerce including aspects involving IPR The ITA monitors foreign countries’ progress in implementing intellectual property agreements reviews GSP petitions submitted by industry and coordinates the Commerce Department’s response to these petitions represents the Commerce Department at the WTO TRIPS Council meets with trading partners to advance U S intellectual property interests abroad and works 169 General information about the Department of Commerce is available at http www doc gov U S Intellectual Property Enforcement Coordinator Annual Intellectual Property Report to Congress February 2019 p 27 170 Congressional Research Service 51 Intellectual Property Rights and International Trade with U S businesses and industry groups to make sure that IPR-related trade concerns are addressed 171 Department of Justice DOJ The DOJ enforces criminal laws that protect IPR in the United States and internationally through the prosecution of intellectual property cases Key units of the DOJ that have IPR enforcement responsibilities are the Criminal Division U S Attorney’s Office the Civil Division the Federal Bureau of Investigation and the Office of Justice Programs  The Criminal Division prosecutes intellectual property crimes involving criminal offenses namely through its Computer Crime and Intellectual Property Section CCIPS  Federal prosecutors in the U S Attorneys’ Offices pursue computer crime and intellectual property offenses The Federal Bureau of Investigation FBI has an intellectual property enforcement program focusing on intellectual property crimes that have the most bearing on national and economic security such as trade secret theft internet priority and counterfeit tracking goods IPR is a top priority of the cyber division though IPR crimes may be investigated in other divisions Other IPR priorities for investigations are counterfeit health and safety products and theft of trade secrets The Civil Division prosecutes civil actions to recover penalties imposed by the Department of Homeland Security’s Customs and Border Protection CBP discussed below with respect to importation of counterfeit goods brings affirmative cases when U S intellectual property rights are infringed and defends CBP enforcement of the ITC’s Section 337 exclusion orders among other things The Office of Justice Program awards grants to support intellectual property enforcement efforts by state and local law enforcement partners    In addition to enforcement activities the DOJ also works with Congress to develop laws that increase protection of IPR and provides training and technical assistance programs on IPR enforcement through its Criminal Division Department of Homeland Security DHS One of the aims of DHS is to ensure the facilitation of legitimate trade while enforcing U S trade and IPR laws and investigating IPR violations specifically trademark counterfeiting and copyright piracy Key parts of DHS involved in IPR enforcement include U S Customs and Border Protection U S Immigration and Customs Enforcement U S Secret Service USSS and the National Intellectual Property Rights Coordination Center IPR Center discussed in next section  Customs and Border Protection CBP is responsible for detecting and seizing counterfeit and pirated goods entering the United States and determining 171 IPR Center Report to the President and Congress on Coordination of Intellectual Property Enforcement and Protection January 2008 p 21 Congressional Research Service 52 Intellectual Property Rights and International Trade   penalties for infringement 172 CBP has the authority to determine whether or not imports infringe federally registered trademarks and copyrights and to detain or seize such infringing goods Rights holders are able to record copyrights and trademarks with CBP’s electronic IPR database and also notify the agency of possible IPR violations through an online reporting system 173 CBP cannot make determinations about patent infringements However it is able to block imports determined by the ITC to infringe a U S patent by a Section 337 investigation 174 Immigration and Customs Enforcement ICE investigates violations of U S law that are connected with U S borders ICE identifies investigates apprehends and removes international criminal groups and other criminals ICE conducts inquiries into the importation and distribution of counterfeit goods ICE activities are closely linked with those of CBP For instance when CBP identifies and seizes counterfeit goods the issue is referred to ICE for criminal investigation Likewise information obtained from ICE that is relevant to identifying and apprehending counterfeit shipments is provided to CBP The U S Secret Service USSS investigates violations of laws relating to counterfeiting of obligations and securities of the United States financial crimes and computer-based attacks on U S financial banking telecommunications and other critical infrastructure As part of such activities USSS may find links to IPR violations Department of Health and Human Services The FDA which is an agency of the Department of Health and Human Services DHHS is responsible for protecting public health by ensuring the safety and effectiveness of medicines food and other products As part of its activities the FDA works to protect consumers against counterfeit medicines To combat the entry of foreign counterfeit drugs into the U S drug supply the FDA works in conjunction with the CBP to conduct border inspections of FDA-regulated products The FDA also engages in foreign inspections to ensure that foreign manufacturers meet FDA quality and labeling requirements Funding to prevent counterfeits from entering the United States is part of overall FDA import safety efforts 175 Library of Congress The Copyright Office of the Library of Congress administers U S copyright law by registering claims to copyright and related documents including “assignments or transfers of rights” and maintains information on registrations recordings compulsory licenses and other copyrightrelated actions Additionally the Copyright Office provides legal and technical expertise on national and international copyright issues to the U S government The Copyright Office also works with other federal agencies to provide assistance and advice in negotiations for international intellectual property agreements as well as technical assistance to foreign countries 172 Certain customs-related IPR policy-making resides within the Treasury CBP Intellectual Property Rights Fact Sheet December 2016 174 IPR Center Report to the President and Congress on Coordination of Intellectual Property Enforcement and Protection January 2008 pp 15-16 Additional information about CBP is available at http www cbp gov 175 Conversation with FDA official November 26 2007 Additional information is available on the FDA website http www fda gov 173 Congressional Research Service 53 Intellectual Property Rights and International Trade crafting their own copyright laws 176 Much like the PTO the Copyright Office does not make copyright infringement determinations which is generally the responsibility of federal district courts or the ITC in Section 337 proceedings Department of State The Department of State represents U S views in both bilateral and multilateral arenas It works to build international consensus for IPR enforcement Information from State’s foreign postings informs the USTR Special 301 review In particular the Bureau of International Narcotics and Law Enforcement Affairs INL works to combat intellectual property piracy while the Bureau of Economics and Business Affairs supports stronger international IPR standards to combat global piracy and counterfeiting 177 U S Agency for International Development AID AID funds training and technical assistance to improve the compliance with the TRIPS Agreement and bilateral trade agreements with the United States Funding for these projects generally have been undertaken by regional or country missions there is no separate budgetary line item for IPR enforcement and training 178 United States International Trade Commission ITC The ITC is a quasi-judicial federal government agency responsible for investigating and arbitrating complaints of unfair trade practices It adjudicates allegations of imported products that infringe U S patents trademarks and copyrights through its Section 337 proceedings The primary remedy employed by the ITC is to order the CBP to stop imports from entering the border Additionally the ITC may issue “cease and desist” orders against individuals determined to be IPR violators Damages for IPR infringement cannot be received through ITC court proceedings right holders seeking damages must file a civil action with a U S federal district court 179 Coordinating and Advisory Bodies The USTR leads interagency coordination of U S trade policy formulation negotiation and implementation Beyond this general mechanism the U S government also has interagency coordination for IPR protection and enforcement activities as well as private sector advisory bodies that provide input into the formulation of U S trade policy Certain key coordinating and advisory bodies are outlined below Office of the U S Intellectual Property Enforcement Coordinator IPEC The IPEC located in the Office of Management and Budget OMB of the Executive Office of the President provides executive direction and coordination of federal agencies involved in IPR 176 IPR Center Report to the President and Congress on Coordination of Intellectual Property Enforcement and Protection January 2008 p 18 Also see Copyright Office website http www copyright gov 177 Ibid pp 17-18 Additional information about the State Department is available at http www state gov 178 Trade Capacity Database and general AID information is accessible at http www usaid gov 179 ITC website http www usitc gov Congressional Research Service 54 Intellectual Property Rights and International Trade enforcement The position of the U S Intellectual Property Enforcement Coordinator subject to Senate confirmation was statutorily established in October 2008 through the Prioritizing Resources and Organization for Intellectual Property Act of 2008 P L 110-403 180 Among its key responsibilities are to develop and implement a “Joint Strategic Plan on Intellectual Property Enforcement” for combating counterfeiting and piracy provide assistance to the USTR in conducting trade negotiations relating to IPR enforcement abroad and chair an Advisory Committee composed of representatives from the OMB Departments of Justice Commerce State Homeland Security and Agriculture FDA AID and the Register of Copyrights FY2017-FY2019 Joint Strategic Plan on Intellectual Property Enforcement The U S Intellectual Property Enforcement Coordinator IPEC assisted by its Advisory Committee is charged with developing a “Joint Strategic Plan” for combating counterfeiting and piracy FY2017-FY2019 Joint Strategic Plan on Intellectual Property Enforcement In December 2016 IPEC released its third Joint Strategic Plan on Intellectual Property Enforcement for FY2017-2019 which noted progress and areas for future activity in major areas of focus 1 enhance IPR enforcement in other countries 2 promote IPR enforcement in U S trade agreements 3 enhance domestic and international patent protection 4 recognition of the role of universities in innovation 5 mitigate the theft of U S trade secrets and 6 promote supply chain accountability in government acquisition The Trump Administration sought comments for a new 3-year Joint Strategic Plan in the Federal Register on September 13 2018 Source Executive Office of the President FY2017-2019 Joint Strategic Plan on Intellectual Property Enforcement December 2016 https www whitehouse gov sites whitehouse gov files omb IPEC 2016jointstrategicplan pdf National Intellectual Property Rights Coordination Center IPR Center The Department of Homeland Security houses the IPR Center an interagency task force whose mission is “to ensure national security by protecting the public’s health and safety the U S economy and our war fighters and to stop predatory and unfair trade practices that threaten the global economy ” Established by ICE in 2002 the IPR Center’s role is to improve and coordinate federal intellectual property functions to more effectively combat IPR-infringing products It is led by the ICE Homeland Security Investigations HSI Director with Deputy Directors from HSI and CBP According to USTR the IPR Center can be distinguished from ITEC discussed below because of the former’s focus on the law enforcement response to IPR theft primarily coordinating investigation and prosecution of IPR infringers under U S criminal laws and the latter’s focus on enforcement of U S rights under trade agreements across a range of issues one of which is IPR 181 180 In creating the IPEC P L 110-403 repealed the authorities creating the National Intellectual Property Law Enforcement Coordination Council NIPLECC Established by Congress in 1999 NIPLECC coordinated U S activities to protect and enforce IPR domestically and abroad drawing together the major federal agencies the help to enforce IPR The Copyright Office participated in the Council in an advisory role The U S Coordinator for International Intellectual Property Enforcement headed NIPLECC’s interagency coordination efforts NIPLECC Report to the President and Congress on Coordination of Intellectual Property Enforcement and Protection January 2008 pp 3-4 181 USTR “ITEC Frequently Asked Questions ” Congressional Research Service 55 Intellectual Property Rights and International Trade Interagency Center for Trade Implementation Monitoring and Enforcement ICTIME ICTIME succeeds the Interagency Trade Enforcement Center ITEC which was established February 28 2012 by Executive Order 182 ICTIME was established under section 604 of the Trade Facilitation and Trade Enforcement Act of 2015 P L 114-125 The center is primarily staffed by USTR employees and its director is appointed by the USTR other federal agencies may detail employees to the center 183 Its purpose is to advance U S trade policy through strengthened and coordinated enforcement of U S trade agreements including IPR ICTIME investigates potential disputes under the auspices of the World Trade Organization inspects potential disputes pursuant to bilateral and regional trade agreements to which the United States is a party and carries out the functions of USTR with respect to the monitoring and enforcement of trade agreements to which the United States is a party USTR and ITA work closely within the ICTIME to identify issues and develop information in areas of economic importance to U S industries In 2019 ICTIME supported the Section 301 investigation on China regarding intellectual property and technology transfer 184 Private Sector Advisory Committee System The USTR manages a private sector advisory committee system for trade policy intended to provide information and advisory on U S negotiating objectives and bargaining positions before the United States enters into trade agreements the operation of existing U S trade agreements and other U S trade policy matters 185 Statutorily established under section 135 of the Trade Act of 1974 P L 93-618 the private sector advisory system includes 16 Industry Trade Advisory Committees ITACs which are jointly administered by the USTR and Department of Commerce ITAC membership draws from industry and labor one of the ITACs focuses on IPR 186 Author Information Shayerah Ilias Akhtar Specialist in International Trade and Finance Liana Wong Analyst in International Trade and Finance Ian F Fergusson Specialist in International Trade and Finance 182 Ambassador Michael Froman Trade Growth and Jobs U S Trade Policy in the Obama Administration Executive Office of the President of the United States Cabinet Exit Memo Washington DC January 7 2017 183 USTR 2018 Trade Policy Agenda and 2017 Annual Report March 2018 p 39 184 USTR 2020 Trade Policy Agenda and 2019 Annual Report February 2020 p 41 185 USTR “Advisory Committees ” http www ustr gov about-us intergovernmental-affairs advisory-committee s 186 USTR “Industry Trade Advisory Committees ITAC ” http www ustr gov about-us advisory-committees industry-trade-advisory-committees-itac Congressional Research Service 56 Intellectual Property Rights and International Trade 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 Congressional Research Service RL34292 · VERSION 24 · UPDATED 57