AALS: IP and International Trade panel

Moderator: Cynthia Ho, Loyola U-Chicago 

Rochelle Dreyfuss, NYU 

Demandeurs learned that regime shifting worked, going from WIPO to WTO.  Then bilateral agreements.  Then ACTA.  That didn’t work fully either, so now we’re doing other things—seeking to incorporate ACTA into bilateral FTAs, with poorer countries that had no role whatsoever in the negotiation process.  Secrecy and trade context are linked; reaping comparative advantage is paramount, and expression/scientific values are largely obscured. Trade negotiators don’t realize that maximizing IP rights isn’t the unmitigated good that relaxing trade barriers is.  Public interest groups have minimal voice.  Procedural reform might help.  But is transparency enough? 

Some countries found flexibility in TRIPs and resisted demands for TRIPs-plus, but many didn’t.  What accounts for the differences?  Partly institutional.  Ecuador, Andean community, was about to sign TRIPs-plus but didn’t because of a ruling it would violate Andean law.  Brazil: health ministry has a lot of power over IP, so its position was shaped by pharmaceutical issues.  Largely shaped by access to information about substance—the actual effects of IP law.  No country had local organizations dedicated to IP.  Other institutions: local generic drug industry turned out to matter a lot.  Some countries have fake drugs; those industries weren’t helpful or trusted.  Others have branded generic industries, relying on TM instead of patent, and that didn’t help either.  Chile has a strong industry and ended up with a nuanced deal with the US.  Empirical studies, long experience, and strategies for dealing with demands for strong protection—some NGOs can do that; others can’t.  Some NGOs are good at vernacularizing their scripts to local interests—human rights, consumer protection, indigenous rights.  WIPO is supposed to perform some of that role, but none of her interviewees mentioned WIPO.  Individuals also matter. 

Bottom line: procedural opportunities, while critical, aren’t enough.  Must reconceptualize substance of IP in helpful ways.  New soft laws; agreements on exceptions and limitations on copyright; Max Planck’s proposal to amend TRIPs.  Her proposal with G. Dinwoodie: the IP acquis: an undertaking of express and implicit obligations.  Rights of proprietors in IP tend to be explicit, rights of users implicit.  They want an agreement on customary etc. norms protecting producers as well as users/nations.  Principles appear repeatedly in national laws, embedded in cognate bodies of law, reflected in national constitutions.  These are the fabric of IP regimes, and recognizing their existence would further legitimate expectations and stability; would also enable forms of resistance to IP rights along with ways of making further demands for IP owners: balance.   Would also assist international dispute resolution, since the WTO panels don’t fully understand IP law. 

Sean Flynn, AU-Washington College of Law 

TPP: post-ACTA, being negotiated right now to make law internationally that will be brought down to the national level.  Enforcement/maximalist agenda led by US, EU, Japan etc.  Gervais says this is an addition narrative: more IP is always better for developed and developing countries.  Dominant over the last century.  Second agenda: development agenda, which is often associated with access to medicines but begins before that.  More limitations, flexibilities, special treatment through all areas of international law including IP.  

Special 301 threats over limited IP rights remain.  One important trend: defunding of civil society organizations over the last decade, both in this country and abroad, dealing with IP issues.  While IP owners have access to policymakers and secret information about negotiations.  ACTA is negotiated in that context, with only two developing countries (Mexico and Morocco, already handed out high IP rights/closely allied with the demandeurs).  TPP: also being negotiated with weaker countries less likely to stand up to the maximalist agenda. 

India: no patent rights for new forms of known substances that don’t result in increased efficacy.  TPP: takes exactly opposite position—intended to create new global standard where the target of the standard is not present at the negotiations. 

IP industries tend to shoot for the head, not the long tail.  Consumers in developing countries are in the tail, except for a small number of wealthy consumers in each country.  Top 1% of people around globe make $35,000/year: that’s the market for medicines, digital media.  How do we shift medicine and digital media into affordable/competitive markets?  That’s the development agenda.  Enforcement agenda is in closed forums; development agenda is multilateral, open. 

David Levine, Elon U. 

Transparency in ACTA—US unwilling to have any.  The public can see how the US position evolved when the final agreement is signed, according to the draft FAQ ultimately coughed up by the US.  Gallows humor!  Wikileaks cables have shown that the US position (key demander of secrecy) was of significant concern to other countries.  Even legal positions of allies have been kept secret on “national security” grounds.  ACTA has been designated a “national security” issue by presidential order, making it an executive order rather than a treaty. This allows ACTA documents to be designated exempt under FOIA.  A list of private entities who had to sign NDAs to see a draft of ACTA, required by USTR, was itself designated exempt from FOIA because disclosure would damage the national security of the US. 

Peter Yu: primary argument is that other countries won’t negotiate in good faith if their positions and US positions are made public.  Levine is dubious about this, but the eventual release of information through leaks/public pressure suggests that perhaps assumptions about secrecy should be rethought.  Mutuality of interest between commercial entities & gov’t defeats transparency.  This is about private interest conflicts, and the gov’t is choosing commercial entities over the public’s right to know. FOIA allows use of exemptions in unintended and bad ways.  FOIA becomes a proxy for this battle: control of flow of info benefits commercial entities because the process allows these entitities to advise the USTR, and not public interest entities.  Ability to sign NDA is given primarily to commercial entities. 

Let’s assume that secrecy is good.  Did we get its benefit through ACTA?  Primary supposed benefit: smooth and efficient process, fewer chefs in the kitchen.  But that level of secrecy was undermined by the reactions of others.  Plus, transparency in other IP policymaking, e.g., WIPO, is significantly more extensive.  Published agendas, lists of participants, meeting minutes, draft documents etc. were all available. By contrast, it was difficult even to find out when ACTA negotiations were taking place.  Majority of major IP treaties going back 20 years completed in comparable or less time despite being more transparent: TRIPs took 3½ years, though we don’t know exactly when ACTA started so it’s not all that easy to compare. 

Documents also indicate that many gov’t ministers didn’t need that level of secrecy. They said as much. Harm to the credibility of the process outweighs the benefits of the secrecy.  People conclude that the negotiators must have something to hide.  ACTA shows that lawmaking gets bogged down with nondisclosure plus unrealistic assumptions about ability to maintain secrecy. 

Keith Maskus, UC-Boulder, Department of Economics 

Critical needs for new environmental mitigation and adaptation technologies, and for ways to diffuse and adapt these to developing countries. Non-OECD emissions are now greater than OECD emissions.  Need for cuts is huge.

IP and tech transfer have been highly contentious in climate change negotiations, in fact so contentious as to be omitted from the last couple of meetings.  Agenda difference is fundamental: OECD countries say patents are necessary and effective for inducing innovation and tech transfer; China, India, etc. say they’re a barrier.  Compulsory licensing, public funding, exempting least developed countries from patent obligations are counterproposals.  Banning patents on genetic resources and plant and animal varieties relevant to climate change adaptation. It is hard to compromise as between these positions. 

Political economy means a domestic bias towards inaction; without int’l coordination, everyone will free ride regardless of wealth.  Radically different social and economic valuations of clean air etc. across and within countries.  Leakage issues: risk of pushing older tech to developing countries without better means of tech transfer.  IP system itself won’t support sufficient investments in environmentally significant tech and especially in efficient tech transfer to developing countries. 

There is good evidence that property rights can expand tech through raising certainty, facilitating licensing, and facilitating tech markets, but the effects don’t seem to happen much in less developed countries.  Studies of patents in environmentally significant technologies: rapid increase in patenting in developing countries, but highly concentrated in China and other middle-income countries.  Virtually no patents in LDCs, suggesting no intent to transfer. Patent ownership is largely in OECD and is widely diffused (meaning multiple tech sources available, unlike the situation in pharma—substantial numbers of substitute technologies often available; China is a major and growing source for solar, fuel cells, wind).  Biofuels and synfuels, however, may behave more like pharma. 

Basic conclusions: patents not yet a significant barrier to tech transfer, but little evidence that patent incentives are enough to overcome externalities and market failures. 

Most ideas stem from pharma.  Patent term extensions to incentivize particular significant tech most useful for reducing emissions; ex post extensions aren’t likely to stimulate more innovation and are costly to users.  If done, should be tied to broad licensing. Short extensions for new uses also seem unlikely to help.  Expedited patent exams and differentiated fee structures have some promise, but requires improving patent examination quality. Difficult to figure out how to set fees and eligibility; could provide rebates for licensing commitments to poor countries, especially for renewal fees.  Lower up front fees and higher renewal fees could also make things move faster.  Short-term extensions in major markets for diffusion to LDCs—doesn’t make much sense to him. 

Patent variations are largely marginal changes; probably need more global coordinated efforts. One possibility: increase info flows through searchable databases and voluntary patent pools with differentiated access royalty rates.  Universities/public labs should license or freely transfer tech developed through public funding—initiatives in their infancy.  Need global access to knowledge treaty on basic research. 

All of the above is secondary to raising global carbon prices to induce innovation and tech transfer. 

Mark Wu, Harvard 

Selective enforcement and commercial scale provisions create additional problems above what we’ve discussed already.  Occurs in the US but is much worse elsewhere, especially in places like China.  Forced people to turn to civil remedies; TRIPs requires such remedies but authorities have enforced them selectively, making it difficult to bring a TRIPs challenge because there are people who get arrested.  Yet remedies are not high enough; they get baked into the cost of doing business, which remains overall very profitable.  EU/US/Japan have therefore pushed for criminal procedures.  TRIPs asks for criminal penalties for infringement of a “commercial scale.”  What does that mean?  Not out of the blue from TRIPs.  Mainly used in developed countries’ law, but Zimbabwe too.  

Maximalist camp: anything that is of economic benefit/private financial gain is commercial scale.  Many critics of this perspective, since any act of infringement could fall into this category.  ACTA proposal initially was acts of commercial gain and significant acts of infringement with no direct or indirect commercial gain; this was eventually shot down as significant activities for direct/indirect commercial gain.  But that doesn’t really solve the problem, because ACTA negotiators aren’t the countries where the selective enforcement is a big problem.  

Selective enforcement may seem to make things not as bad as they seem from the anti-maximalist position.  But that pleases no one: not the maximalists, not the development agenda folks who are interested in access to medicines/seeds/essential tech, which are issues where there is often a chokepoint and you can’t get the latest one off of the street corner the way you can with DVDs or purses.  Two dissatisfied sides who feel unable to deal with each other’s problems.  Need to seek an accommodation, but emerging economies will make this harder instead of easier over the next decade. 

Michael Carroll: Isn’t SOPA etc. an admission by US rightsholders that the international products/regimes they invested in have failed, since they can’t get enforcement elsewhere and so they have to wage proxy war against domain names etc.?  Why is there bite to these regimes on the patent side and not the copyright side? 

Flynn: SOPA tries to deal with a very different problem than Wu talks about—US-directed websites trading in pirated material. The piracy problem in the US is very small.  Hard to measure piracy, but the number of true consumers in the US of most of their media through pirated content is about 1% by self-report.  India, Russia: tech companies say the piracy rate is well over 60%, and for some fields like games or movies can be 80-90%.  You can talk about those problems completely differently.  SOPA has lots of problems, but it’s not the same as trying to cut off piracy in Russia/China. What kind of world do you have to create in those countries to drive the piracy rate down to US rates?  You can’t cut off all piracy in a country where piracy is the mass market. Universal pricing is the problem—in India, a legit CD costs $17.  Won’t sell many CDs in a country with GDP $1500.  You can throw the 99% in jail, or you can try public policy forcing media into new distribution models. As long as the agenda is the perfect enforcement model for the $17 CD, that is doomed to fail. 

Maskus: the policy is designed to destroy content, ultimately, by punishing and angering your own consumers.  Extending that internationally makes little sense.  New distribution structures are better: licensing digital content is difficult technically and legally with different collective societies.  That needs to be cleaned up through competition policy or agreement about licensing.  We don’t need a global compulsory licensing regime because everyone can always do compulsory licensing already, but the question is one of effectiveness. 

Dreyfuss: Many countries don’t have enough money to affect incentives much. Even if they bought the stuff, it wouldn’t provide much; the real problem is exportation, which SOPA is trying to deal with. Might be better to deal with exports in TRIPs for both patents and software.  Most patented stuff really does ship as a physical problem so it could be dealt with that way as part of an acquis.  Exports instead of imports. 

Colleen Chien: She hears discussion of legislative agreements and dispute settlement panels as the new form of decisionmaking rather than courts.  Is it enough to get countries to agree to ACTA or will that be tested in enforcement mechanisms. 

Dreyfuss: developing countries see nonviolation complaints as a real threat to push for compliance, but there are also opportunities to grow WTO law.  One area where that might happen is bilaterals asking for TRIPs-plus when countries thought they were signing on to ceilings—a developing country might be able to bring a nonviolation complaint when pressured to sign TRIPs-plus.  Any change now draws the charge of “not TRIPs-compliant,” but we don’t know whether that’s true.  Why not more complaints/proceedings? Because people are regime-shifting. That’s why she thinks a nonviolation complaint might be useful. But people are also leery because present decisions have not displayed much understanding of what IP regimes really are. 

Wu: have to convince developing countries that they want to do a nonviolation complaint but still have all the benefits of TRIPs—have to create a carveout for TRIPs and get the rest of the trade benefits.