More notes on the USTR 2012 Special 301 List

The USTR’s 2012 Special 301 list was published on April 30, 2012. Below are some comments about certain portions of the Special 301 Report that concern access to knowledge and access to medicines.

USTR cites the “TEAM” approach to access to medicines
To make the USTR position on access to medicine seem more moderate, this year’s Special 301 report touts the work of a new interagency “Trade Enhancing Access to Medicines” (referred to as TEAM) policy committee, that USTR first presented, in vague terms, through a white paper in September 2011 during the eighth round of negotiations on a proposed Trans Pacific Partnership Agreement (TPPA) trade agreement. The details of the proposal were secret, except that USTR provided them to private sector “cleared advisors,” including through an advisory committee chaired by PhRMA. A subsequent leak of the TPPA TEAM proposal confirmed fears from public health groups that the approach does little to moderate the damaging impact of USTR proposals for patent terms extensions, patent linkage and years of exclusive rights in pharmaceutical test data, effectively ending the access to medicines provisions for developing countries included in the so called “May 10 Agreement of 2007”, which had also been called the “New Trade Policy.” Although the May 10th Agreement did not provide a perfect solution to access to medicines concerns in various free trade agreements, it certainly better addressed these issues than the TEAM proposals in the TPPA negotations, which public health groups consider a step backwards. It is thus disappointing to see that USTR high light the “TEAM” initiative in its 301 report, as evidence that it is making an effort to protect consumers.

USTR unilateral pressure to adopt TRIPS plus measures on pharmaceutical test data

One of the major issues in the Special 301 report concerns USTR objections to what it calls the “lack of protection against the unfair commercial use, as well as unauthorized disclosure of test and other data generated to obtain marketing approval for pharmaceutical products.” The following are countries where pharmaceutical test data protection are explicited mentioned in the report, including those cases, like Israel or Tajikistan, where USTR reports some progress being made to implementing the type of exclusive rights regime favored by the USTR.

Countries on Priority Watch List (PWL) cites for concerns about test data protection
(10 of 13 countries on PWL)

  • Algeria
  • Argentina
  • Chile
  • China
  • India
  • Indonesia
  • Pakistan
  • Russia
  • Thailand
  • Venezuela

Countries on Watch List (WL) cites for concerns about test data protection
(11 of 26 countries on Watch List)

  • Brazil
  • Dominican Republic
  • Ecuador
  • Egypt
  • Israel
  • Lebanon
  • Mexico
  • Philippines
  • Tajikistan
  • Turkey
  • Vietnam

Countries on Section 306 Monitoring, cited for concerns about test data protection
(2 of 2 countries on Section 306 Monitoring)

  • China
  • Paraguay

KEI notes that exclusive rights in test data is designed to delay entry of generic drugs into the market, and in addition, creates an requirements that generic competitors to invest in unnecessary clinicial trials, contrary to medical ethics.

It is unclear what USTR considers to be a “lack of protection against unfair commercial use” for regulatory test data. Chile, for example, does provide a system for exclusive rights in test data, but these rights are subject to specific exceptions. Exclusive rights are not required under TRIPS, and even for TRIPS plus protection; other models exist, such as a cost-sharing model of protection.

Several countries (Argentina, China, Chile, Dominican Republic, Ecuador, Egypt, Mexico and Pakistan) are cited for issues related to the linkage of drug registration and patent status. Patent linkage, which exists in the United States but not in several European countries, is controversial, in part due to the extensive evidence of abuse, including several cases where weak or non-germaine patents have been asserted in the linkage process. The alternative to regulatory linkage is for patent owners to enforce their private rights in patents, and to not ask the regulatory bodies to interfere with normal patent enforcement actions.

The May 10th Agreement made regulatory patent linkage optional rather than mandatory, so it appears the new “TEAM” approach would reinstate linkage as a mandatory requirement, to be one of the US demands as expressed in its Special 301 watch lists.

WIPO Internet Treaties and TPMs
The United States specifically encourages countries to implement the WIPO Internet Treaties, including providing “protection against the circumvention of technological protection measures.” The WIPO Internet Treaties require protection of TPMs only in connection with the exercise of rights protected by copyright law. The US has made efforts to have countries adopt laws that go beyond Article 11 of the WCT, for example in its TPPA proposal where circumvention of a TPM is a separate cause of action, independent of copyright infringement. It should be noted that the US specifically mentions several TPPA negotiating partners: Brunei, Chile and Vietnam, as well as prospective TPPA partners such as Mexico, the Philippines and Thailand.

For example, the 2012 report urges “Chile to implement protections against the circumvention of technological protection measures.” However, Chile does provide for protection of TPMs through civil remedies. While no specific criminal remedies are available through circumvention of TPMs under Chile’s copyright laws, there are other applicable laws such as those related to telecommunications or cyberlaw that provide such penalties. It does not appear that Chile has broken international obligations or even its bilateral obligations contained in the U.S.-Chile FTA with respect to TPMs. Chile does require underlying copyright infringement to be found liable for circumvention of a TPM and it appears that USTR wants greater availability of criminal sanctions and for circumvention to be a separate cause of action–something that the U.S. Court of Appeals for the Federal Circuit has considered to be an absurd result–independent of copyright infringement.

In addition, the Special 301 report makes multiple mention of notice and takedown regimes. For example, one reason cited for placing Chile on the 2012 priority watch list urges Chile to “amend its Internet service provider liability regime to permit effective action against piracy over the Internet.” Chile does have a notice and takedown system to address piracy on the Internet, but requires a court order to help safeguard against potential abuses by right holders, and the dispute with the USTR is about the extent that Chile provides due process rights to alleged infringers.

Ukraine was also encouraged to adopt a system of notice and takedown.

Trans-Pacific Partnership Agreement
Several times throughout the report, USTR references the TPPA and asserts that concerns regarding specific countries, including Malaysia (which was taken off this year’s watch list), Chile (priority watch list) and Brunei (watch list) can be addressed “through the Trans-Pacific Partnership Agreement.” The US proposals for the TPPA contain very high levels of IPRs and enforcement that go well beyond TRIPS, the requirements of the WIPO Treaties and, at times, even beyond what is currently required under US law.

Pharmaceutical Reimbursement
The Special 301 report cites concerns of industry regarding pharmaceutical reimbursement systems, including those of industrialized countries. It should be noted that New Zealand is specifically mentioned in the report and that New Zealand’s PhARMAC system is currently under attack by the USTR proposal for the TPPA regarding pharmaceutical reimbursements.

U.S. industry has expressed concerns regarding the policies of several industrialized trading partners, including Finland, Germany, Greece, Japan, Korea, New Zealand, Poland, Turkey and Taiwan, on issues related to innovation in the pharmaceutical sector and other aspects of health care goods and services. Examples include:

  • With respect to Poland, U.S. industry is concerned about healthcare reform legislation introduced in 2010 that would alter Poland’s pricing, reimbursement, and clinical trials policies. Industry continues to express concern about the pharmaceutical industry’s general lack of ability to meet with the Ministry of Health to provide their perspectives on policy initiatives.
  • With respect to New Zealand, U.S. industry has expressed serious concerns about the policies and operation of New Zealand’s Pharmaceutical Management Agency (PhARMAC). Industry continues to express concerns regarding, among other things, the lack of transparency, fairness, and predictability of the PhARMAC pricing and reimbursement regime, as well as the negative aspects of the overall climate for innovative medicines in New Zealand.
  • With respect to Turkey, U.S. industry expresses concern regarding the lack of fairness and the slow pace of pharmaceutical manufacturing inspections.

The United States is seeking to establish or continue dialogues with relevant trading partners to address these and other sectoral concerns, and encourage a common understanding on questions related to innovation in the pharmaceutical and medical device sectors. For example, the United States-Korea Free Trade Agreement will improve access to innovative medical products and ensure the transparent, predictable, and non-discriminatory pricing and reimbursement of innovative and generic pharmaceutical products, and medical devices. The United States is also continuing its engagement with China to promote fair and transparent policies in this sector.

The United States shares policy goals and concerns related to health care with other countries, including challenges surrounding aging populations and rising health care costs. The United States also shares the objective of continued improvement in the health and quality of life of its citizens, and the objective of delivering care in the most efficient and responsive way possible. The United States looks forward to engaging with these trading partners to address specific concerns related to reimbursements, regulatory policies, and transparency.

Patent protection for process patents
In USTR’s comments regarding Norway, USTR noted that, “the United States remains concerned about the lack of product patent protection for certain pharmaceutical products; Norway’s regulatory framework for process patents filed prior to 1992, and pending in 1996, denies adequate patent protection for a number of pharmaceutical products currently on the Norwegian market.” The 2012 Report also registered similar complaints with respect to process patents in Finland. One assumes that USTR does not believe such policies violate WTO norms, or it would have considered the stronger sanction of a WTO dispute resolution case. (The same point can be made for several other issues raised in the 301 report).

Pre-Grant Opposition
In addition to the USTR comments regarding India’s use of compulsory licenses (more detail provided here), the Special 301 Report also “urges India to continue to work to streamline its patent opposition proceedings.” Again, it is unclear exactly what would satisfy the US with respect to India’s patent opposition proceedings, but the U.S. proposal for TPPA demonstrates its intention to attack India’s section 3(d) which permits pre-grant opposition, an important TRIPS flexibility.

Compulsory Licensing of patents
Although USTR claims to “respect its trading partners’ rights to grant compulsory licenses in a manner consistent with the provisions of the TRIPS Agreement, and encourages its trading partners to consider ways to address their public health challenges, while maintaining IPR systems that promote investment, research, and innovation,” as noted in this KEI blog, this year’s Special 301 report singles out and expresses concern about the 2012 India compulsory license for patents on Nexavar, a cancer drug that was priced at more than $68k per year in India. Some have suggested the USTR response was moderate, while other thought it was punitive for a case where the merits were so compelling as regards the abuse of the patent right.

Additionally, the 2012 Special 301 report made the following comments, highlighting its concerns that not all stakeholder concerns were adequately reflected in China’s final document related to Measures for Compulsory Licensing of Patents:

In 2011, China’s State Intellectual Property Office (SIPO) issued “Draft Measures for Compulsory Licensing of Patents” for public comments. These measures are intended to provide greater guidance to SIPO, patent holders, and individuals and entities that seek the grant of a compulsory license under China’s Patent Law. The United States appreciates that SIPO provided an opportunity for interested stakeholders to comment upon the draft. A number of companies and governments, including the United States, provided comments on these measures, raising concerns ranging from the length of time provided for certain procedural steps, to substantive concerns regarding the scope and grounds for the application of a compulsory license. On March 19, SIPO issued a slightly revised document, dated March 15, 2012, with indications that the document will go into effect on May 1, 2012. The United States is concerned that many stakeholder concerns were not reflected in the final document. The United States looks forward to working with stakeholders and the Government of China to ensure that the implementation of these measures is consistent with China’s international obligations and does not unfairly disadvantage foreign patent holders, including through further amendments to the measure if necessary.

Compulsory Licensing of copyrights
The report cites several countries of concern, though not all were placed on the watch list, with respect to issues of royalties for compulsory licenses of musical works:

Growing challenges facing rights holders seeking to collect royalties that are legally owed for the public performance of their musical works in certain regions. This is a significant issue in the Caribbean region, including in the Bahamas, Barbados, Jamaica and Trinidad and Tobago. For example, in Trinidad and Tobago, there is ongoing litigation concerning the collection of unpaid performance royalties from cable system operators, a problem which occurs in Jamaica and in the Bahamas as well. In addition, a government owned broadcasting service in Barbados has reportedly refused to pay for a license to broadcast U.S. musical works on its network. Despite a ruling against this broadcasting service by the Barbados Supreme Court in 2007, U.S. composers have been unable to receive royalties because the government has not established a Copyright Tribunal to determine the appropriate compensation. The problem also persists in India and Vietnam, and in China where the public performance of musical works has been subject to a compulsory license since 2001, but no tariff was set until 2009 when it was ultimately set at the lowest rate in world.

Ex-Officio Actions
USTR placed Canada on its priority watch list again in 2012 and one comment in the Special 301 report notes that “The United States also continues to urge Canada to strengthen its border enforcement efforts, including by providing custom officials with ex officio authority to take action against the importation, exportation, and transshipment of pirated or counterfeit goods.” USTR makes a similar complaint repeatedly throughout the report, citing other countries’ failures to provide customs authorities with ex officio power, despite the fact that ex officio action is not mandatory under TRIPS and does not appear to be mandated by other international obligations such as the WIPO Internet Treaties. Thailand again appears on the priority watch list, at least in part over concerns that “several key pieces of legislation remain pending,” including one law that would give Thai Customs ex officio authority. Ukraine (priority watch list), Belarus (watch list) and Brunei (watch list) all appear with the cited concern about the lack of ex officio authority given to customs officials.

Pre-Established (Statutory) Damages
The 2012 report “encourages Israel to amend its copyright to provide for statutory damages.” ACTA rejected a mandatory requirement that countries provide for pre-established or statutory damages. ACTA made statutory damages one among other options, and some high-income countries do not provide for pre-established damages in their copyright laws. It is unclear why Israel is singled out for failure to provide statutory damages, when statutory damages have not been widely adopted internationally.

“Deterrent” penalties
The USTR Special 301 report encourages countries to provide high levels of enforcement. It criticizes some countries for their lack of criminal prosecutions and “deterrent-level sentences,” including: Argentina, Brunei, Egypt, India, Indonesia, Jamaica, Kuwait, Romania, Thailand, Ukraine, and Vietnam. In addition, it lists concerns regarding lack of “deterrent remedies” or “deterrent penalties,” in other words, high damages, for the following countries: Chile, China, Costa Rica, Mexico, Pakistan and Russia.

Industrial policy

The Special 301 report takes a specific swipe at industrial policy initiatives designed to promote “indigenous innovation” and asks countries to reject the following policies:

  • Requiring the transfer of technology as a condition for allowing access to a market, or for allowing a company to continue to do business in the market.
  • Directing state-owned enterprises in innovative sectors to seek non-commercial terms from their foreign business partners, including with respect to the acquisition and licensing of IPR.
  • Failing to effectively enforce IPR, including patents, trademarks, trade secrets, and copyrights, thereby allowing firms to gain competitive advantages from their misappropriation or infringement of another’s IPR.
  • Failing to take meaningful measures to prevent or deter cyber-espionage.
  • Requiring use of, or providing preferences to, products or services in which IPR is either developed or owned locally, including with respect to government procurement.
  • Manipulating the standards development process to create unfair advantages for domestic firms, including with respect to the terms on which IPR is licensed.
  • Requiring unnecessary disclosure of confidential business information for regulatory approval, or failing to protect that information.

Green technology and IPRs in relation to mitigation of, and adaptation to, climate change

Perhaps in relation to UNFCCC negotiations on IPRs and climate change and to forestall discussions at the WTO on IPRs and green technology, the USTR is highlighting the role of intellectual property in facilitating transfer of technology with respect to environmentally sound technologies:

The United States notes in this context that strong IPR protection can provide incentives for the voluntary transfer of critical green goods and services, and can promote economic growth and create jobs, particularly in developing and least-developed countries that need these benefits most. IPR protection is essential to facilitate access to and transfer of today’s environmental technologies, and to promote tomorrow’s innovation. Without IPR, many of the technologies on which we rely today and will rely upon in the future would not have been developed. Without such technologies, inventors and consumers alike would be deprived of critical advances with respect to key environmental challenges, including the mitigation of, and adaptation to, climate change. In addition, firms are likely be reluctant to enter into technology transfer arrangements in countries with weak IPR enforcement regimes. Intellectual property rights are thus a key driver of private sector investment. The United States continues to work internationally to ensure robust IPR protection and enforcement, which gives inventors and creators the confidence to invest in the production, adoption and delivery of green technology goods and services without fear of misappropriation, or outright theft, of their IPR.