2014, NFTC discussion of India

The National Foreign Trade Council (NFTC) submission (7 February 2014, USTR-2013-0040) to USTR’s 2014 Special 301 Review requested USTR to designate India as a Priority Foreign Country and “conduct an out-of-cycle review of India to assess” Indian policies “across sectors, including pharmaceuticals, medical, and green technologies, to advance a program to compulsory license foreign proprietary technology, in direct contravention of the more limited scope of compulsory license provisions in the WTO TRIPS Agreement.”

The docket number for this submission is: USTR-2013-0040.

Here are some choice quotes from the NFTC submission to USTR.

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RE: 2014 Special 301 Review: Identification of Countries Under Section 182 of the Trade Act of 1974: Request for Public Comment and Announcement of Public Hearing (Docket number USTR-2013-0040)

I. Country-specific concerns

India remains an important and growing market for U.S. companies, but a significant source of concern when it comes to adequate and effective protection of intellectual property rights. As described below and in our prior years’ comments, India continues to pursue an agenda of forced technology transfer in contravention of a fundamental principle governing international trade – national treatment – and seeks to weaken IP rules and frameworks domestically and internationally. India also continues to systematically deny U.S. companies the protection and opportunities afforded its own industries, particularly with respect to IPR. The consistent use and threat of compulsory licensing, as well as a continued lack of effective trade secrets protection are additional core issues of concern. These efforts unfairly disadvantage American businesses and undercut the country’s ability to innovate and attract investment.

NFTC urges USTR to conduct an out-of-cycle review of India to assess the IPR challenges identified below. To the extent that USTR finds deterioration in the adequacy or effectiveness of India’s protection and enforcement of intellectual property rights, we would urge USTR to consider designating India as a Priority Foreign Country.

National Manufacturing Policy: The Government of India continues to take measures across sectors, including pharmaceuticals, medical, and green technologies, to advance a program to compulsory license foreign proprietary technology, in direct contravention of the more limited scope of compulsory license provisions in the WTO TRIPS Agreement. One primary purpose appears to be to enable domestic industries to avoid paying commercial rates for technologies and to shield domestic companies from foreign competition.

One continued concern is India’s intention to engage in policies that would violate the intellectual property rights of foreign green technologies in order to favor domestic companies. Section 4.4 of India’s National Manufacturing Policy (NMP), for example, states that India- based clean technology companies “have the option to approach the Government for issue of a Compulsory License for the technology which is not being provided by the patent holder at reasonable rates or is not being worked in India to meet the domestic demand in a satisfactory manner.”

The National Manufacturing Policy lists healthcare-related technology as another strategic industry, alongside clean technology, and related to this, India is reportedly in the process of expanding its “essential medicines” list to other product categories as well.

Trade Secrets: In India, the Food Safety Standards Authority of India (FSSAI) continues to take samples of all imported flavors and to submit them to chemical analyses. These actions are not supported by relevant legal or regulatory requirements in India. By opening the flavor packages to take samples, they make those flavor packages unusable. Ultimately, their actions impinge on trade secrets as regards to flavor composition.

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National IPR Strategy: India released a draft National IPR Strategy in 2012, which is broad in scope and appeared to represent an effort to tackle some of the important weaknesses that remain in India’s IPR policy and enforcement. Publication of the Policy was a hopeful sign, but no concrete action has been taken thus far.

Trade secret protection is one example of the inaction that followed publication of the National IPR Strategy. One key problem in India continues to be the lack of an effective trade secrets protection regime. Although the National IPR Strategy recognizes that a “predictable and recognizable trade secret regime will improve investor confidence,” it fails to call for greater protection of trade secrets and simply asserts that they are already “protected through the contract law in India and [are] part of the concept of protection against unfair competition.” In India in particular, the failure to protect trade secrets beyond the bounds of contract law is particularly concerning, considering the relationships many U.S. companies have with the country’s service sector. In the course of business dealings, confidential information is regularly exchanged with individuals, such as contractors, who may not be in direct privity with a U.S. company. As a result, U.S. companies may have little recourse against those individuals who misappropriate their critical business information, ultimately hurting American competiveness.

To ensure full market access and non-discriminatory treatment of Indian and non-Indian companies, and in order to ensure full TRIPS-compliance, it will be critical for India to adopt an effective, codified, trade secret act. This would reduce the uncertainty now often faced by companies and the difficulties in protecting their proprietary technologies and confidential data. As such, it would give U.S. companies greater confidence to invest in India, and to collaborate, share technology and know-how, and engage in mutually beneficial technology supply and partnership contracts with Indian partners and customers.

Other Instances of Forced Technology Transfer, Compulsory Licensing, and a Failure to Provide Effective IP Protection: India’s National Manufacturing Policy and its draft IPR Policy are not the only evidence of the government’s failure to provide for effective IPR protection and enforcement. Other examples include a 2010 discussion paper published by a department in the Ministry of Commerce (DIPP) and which argued that “compulsory licensing has a strong and persistent positive effect on domestic invention” and encouraged India’s Controller General of Patents to grant a compulsory license if, among other things, he was satisfied that the patented invention is not being worked (i.e., manufactured) in India.

Additionally, India’s patent statute requires every patentee and licensee to furnish periodic statements that include significant details of how they are working each patented invention on a commercial basis in India or, if not worked, the reasons why and the steps being taken to work the invention. Not only is this “Form 27” process highly burdensome from an administrative point of view, but we are concerned that the information that is provided could be used at some point to justify compulsory licenses in a variety of industries, as specifically contemplated in the Form. Recently, Form 27 submissions have become publicly available – which is likely to result in even greater pressure on Indian authorities to compulsory license the covered products. An additional problem is that most questions in Form 27 are only directly answerable in a onepatent- one-product context and cannot clearly be answered, for example, where multiple patents relate to a single product – which is the case for many of today’s most cutting-edge industrial,

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manufacturing, and information technologies, for example. Notwithstanding the impracticality of attributing a specific commercial value to one patented feature of a complex technology, the form calls for criminal and civil penalties for submission of false information.

Since 2012, India has also infringed, overridden, or revoked nearly a dozen pharmaceutical patents held by foreign firms, in part because the patented product was manufactured outside of India. These and other instances of broad compulsory licensing are based on Section 84 of India’s Patent Act and pose a clear risk not only to U.S. pharmaceutical industries, but to advanced manufacturing, industrial, and other innovative U.S. businesses as well. The risk of a further broadening of India’s compulsory licensing practices to other categories of technology is very real, as evidence, for example, by the reports of additional “essential technologies” lists for on-pharmaceutical products that we already mentioned above.

Finally, the Indian Government has so far failed to pass the National Innovation Act, which could have been a positive step towards providing a more robust IPR environment. The Innovation Act would include a range of measures to promote innovation (including an annual “Science and Technology Plan” and provisions to aid public/private partnerships, promote innovation financing and establish special innovation zones). It would also codify rules on the protection of confidential information, which to date relies on common law principles, meaning that the scope of protection is unpredictable.

Third Party Access to Essential Facilities: We commend efforts of the Indian Government’s Committee of the Ministry of Corporate Affairs to formulate a National Competition Policy for India that has evolved into a comprehensive and helpful framework for fair competition. One particular issue, however, is a serious cause for concern. Section 5.1(vi) of the Competition Policy contains a blanket requirement for dominant infrastructure and IPR owners to grant third party access to “essential facilities” on “agreed reasonable and nondiscriminatory terms”, without being in any way more specific about the situations in which this may or may not be justified.

Blanket application of an “essential facilities” doctrine to IPR owners has been heavily criticized by experts and its application severely curtailed around the world. A broad international consensus exists that the unconditional, unilateral refusal to license a technology rarely raises competition concerns. In addition, the decision not to license a technology is considered to be the most fundamental right conveyed under the IP rights laws – namely, the right to exclude. To impose a blanket duty to license on IPR owners could effectively nullify IP rights and impair or remove the economic, cultural, social and educational benefits created by them. The blanket inclusion of IP rights currently foreseen in the Policy is directly at odds with international competition standards and fundamentally irreconcilable with TRIPS. Although industry consultations with the Minister and Joint Secretary yielded a solution in which the Ministry agreed to review the essential facilities language, the final National Competition Policy has still not been passed or made public.

India’s active pursuit to erode IP through international fora: India regularly pursues weaker IP rights within international fora such as WIPO and WTO. At WIPO, India collaborates with Brazil to obstruct meaningful discussion of IP best practices, including efforts to improve patent

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quality and share examination efforts across patent offices. At WTO, India has even insisted that intellectual property rights are totally unrelated to innovation.

Unfortunately, India’s influence with respect to intellectual property policy may be expanding. In May 2013, the BRICS IP Offices agreed on a roadmap for collaboration. The roadmap identifies India as the lead IP office to improve the influence of BRICS offices within WIPO and other fora.