Reviewing USTR’s 2014 Special 301 Report

Yesterday, the Office of the U.S. Trade Representative (USTR) released its annual Special 301 Report, citing 37 countries for inadequate and ineffective protection of intellectual property. The listing included:

 

Priority Watch List: Algeria; Argentina; Chile; China; India; Indonesia; Pakistan; Russia; Thailand; and Venezuela; and

Watch List: Barbados; Belarus; Bolivia; Brazil; Bulgaria; Canada; Colombia; Costa Rica; Dominican Republic; Ecuador; Egypt; Finland; Greece; Guatemala; Jamaica; Kuwait; Lebanon; Mexico; Paraguay; Peru; Romania; Tajikistan; Trinidad and Tobago; Turkey; Turkmenistan; Uzbekistan; and Vietnam.

 

The 2014 report highlights continuing threats global U.S. intellectual property rights holders’ face in countries throughout the world. And because IP and innovative industries are so vitally important to the U.S. economy — for example, a Department of Commerce study estimates that in 2010, copyright-intensive industries accounted for $641 billion in value-added to GDP and 5.1 billion jobs — it is necessary to make sure the IP enforcement remains a priority for foreign policymakers.

USTR made minimal changes to the country designations from the 2013 Special 301. In fact, the ten countries listed on the Priority Watch List (PWL) remain completely unchanged. The only changes to the Watch List (WL) were the removal of Israel, Italy and the Philippines due to improvement in their IPR practices. USTR did not elevate India from the PWL to the higher Priority Foreign Country (PFC) designation. Instead, USTR called for an out-of-cycle review (OCR) on India — a tool that USTR uses to encourage progress on IPR issues of concern — with India, echoing U.S. Trade Representative Mike Froman’s statement to the House Ways and Means Committee to resolve India’s IP issues with “negotiation, not litigation.”

In addition, USTR announced it would conduct OCRs for Kuwait and Paraguay, both of which are on the WL. The OCR for Kuwait is being undertaken due to its worsening IP environment, and holds the possibility of elevating Kuwait to the PWL at a later date this year. In contrast, improvements to Paraguay’s IP environment — such as creating the National Directorate of Intellectual Property and granting the first pharmaceutical patents since 2005 —could merit its removal from the WL. USTR also said it will continue the 2013 OCR for Spain, despite the country being unlisted in 2014. The OCR on Spain was announced in 2013, and will focus on "concrete steps taken by Spain to combat copyright piracy over the Internet.”

Interestingly, the 2014 report also listed Ukraine in a third category separate from the PWL and WL, though not specifically designating it as a PFC. Ukraine’s designation as a PFC in the 2013 Special 301 led USTR to launch an investigation; ultimately finding the country’s IPR policies are unreasonable and burden or restrict U.S. trade. Due to the development of the threats to Ukraine from Russia, however, U.S. officials opted to postpone any actions they may have taken in punishment.

Canada also remained on the WL this year, despite a call from 32 House members to elevate it to the PWL for its overly restrictive interpretation of the “promise doctrine” that is detrimental to the U.S. pharmaceutical industry. The report described the standards being used by the Canadian courts as “amorphous and evolving.” However, even though Canada was not elevated to the PWL, Rep. Todd Young (R-IN), one of the lawmakers who spearheaded the letter, said he was pleased that the report addressed the issues surrounding Canada’s patent utility standard.

In addition, four TransPacific Partnership (TPP) countries remain on the list: Chile, Mexico, Peru and Vietnam. These four countries were also on the 2012 and 2013 Special 301 reports. The integrity of the TPP as a 21^st century trade agreement is at stake if it includes countries consistently finding themselves on the Special 301 report. If these countries wish to join the TPP, they need to get off the list, and stay off.

The lack of changes made to both the PWL and WL indicate that many of the offenders in IPR continue to be the same, and will flout the generally accepted practices of the international community without care for their impact on the global economy. In fact, the 2014 report identified several new trends in the status of IP protection and enforcement around the world, including: increased protection of geographical indications for food products; copyright protection and enforcement in the Caribbean; and how some IP policies can undermine environmental protection.

These continuing challenges highlight the need for additional trade remedies to adequately enforce and protect the rights of U.S. businesses and innovators abroad, including mandatory country reviews if a particular nation is on the Special 301 Report for five years or more, more funding for USTR and collaboration among international organizations such as the World Trade Organization and World Bank on trade sanctions. ITIF will be suggesting such measures in its forthcoming Mercantilist 301 report.