Intellectual Property Rights and International Trade
Prepared for Members and Committees of Congress
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 and they may take the form of patents, trade
secrets, copyrights, trademarks, or geographical indications. U.S. industries that rely on IPR
contribute significantly to U.S. economic growth, employment, and trade with other countries.
Counterfeiting and piracy in other countries may result in the loss of billions of dollars of revenue
for U.S. firms as well as the loss of jobs. Responsibility for developing IPR policy, engaging in
IPR-related international negotiations, and enforcing IPR laws cuts across several different U.S.
Government agencies. The main structures for coordinating interagency efforts are the National
Intellectual Property Law Enforcement Coordinating Council (NIPLECC) and the Strategy
Targeting Organized Piracy (STOP!).
Promoting the enforcement of IPR is an important component of U.S. international trade policy.
Since the 1995 Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) at
the World Trade Organization (WTO), trade policy has been used to enforce IPR abroad. The
United States and several trading partners recently announced plans to pursue a multilateral anti-
counterfeiting agreement that would surpass TRIPS Agreement commitments.
The United States also pursues international IPR support through regional and bilateral free trade
agreements (FTAs), which often include IPR commitments by U.S. partners exceeding their
TRIPS Agreement obligations. However, for the Peru, Panama, and Colombia FTAs, the
Administration agreed to scale back some IPR requirements to bolster bipartisan support for the
FTAs. Other trade policy tools also are available for U.S. efforts to advance international IPR.
Pursuant to Section 182 of the Trade Act of 1974 as amended (P.L. 93-618), the Office of the U.S.
Trade Representative (USTR) identifies countries providing inadequate IPR protection in its
annual “Special 301” report. Section 337 of the amended Tariff Act of 1930 authorizes the U.S.
International Trade Commission (ITC) to prohibit U.S. imports of infringing products.
Additionally, under the Generalized System of Preferences (GSP), the United States may consider
a developing country’s IPR policies and practices as a basis for offering preferential duty-free
entry to certain products from the country, and can suspend GSP benefits if IPR protection is
IPR protection and enforcement bring up several key issues for Congress. A central issue is the
appropriateness of FTAs as a vehicle for promoting IPR. Congress also faces the challenge of
balancing the need for IPR protection and enforcement with the goals of the Doha Declaration on
Public Health. Additionally, there has been concern about the effectiveness of the current U.S. th
IPR enforcement structure. In the 110 Congress, Legislation (P.L. 110-403) was enacted to
establish a new structure to coordinate federal IPR enforcement activities. This report will be
updated as warranted by events.
Introduc tion ..................................................................................................................................... 1
Intellectual Property Rights Basics.................................................................................................1
Types of Intellectual Property...................................................................................................1
Patent s ................................................................................................................................. 2
Copyright ...................................................................................................................... ...... 3
Tr ademarks ......................................................................................................................... 3
Infringement of Intellectual Property........................................................................................3
Piracy .................................................................................................................................. 4
Counterfeiting ..................................................................................................................... 4
Global Intellectual Property Holdings.............................................................................................4
Contribution of Intellectual Property to U.S. Economy..................................................................6
Prevalence and Economic Consequences of IPR Infringement................................................7
Seizures ............................................................................................................................... 7
The Organization Structure of IPR Protection...............................................................................13
Multilateral IPR System..........................................................................................................13
World Trade Organization (WTO)....................................................................................13
Declaration on TRIPS Agreement and Public Health ......................................................15
World Intellectual Property Organization (WIPO)...........................................................16
Free Trade Agreements...........................................................................................................20
Trade Promotion Authority...............................................................................................20
Patent s ............................................................................................................................... 21
Copyright ...................................................................................................................... .... 24
U.S. Trade Law..............................................................................................................................28
Special 301 Country Lists.................................................................................................28
Country Identification Factors..........................................................................................29
Generalized System of Preferences.........................................................................................31
U.S. Agency Functions and Funding for IPR..........................................................................31
Department of Commerce (Commerce)............................................................................32
Department of Justice (DOJ)............................................................................................33
Department of Homeland Security (DHS)........................................................................33
Food and Drug Administration (FDA)..............................................................................34
Department of State (State)...............................................................................................35
United States Trade Representative (USTR).....................................................................36
United States International Trade Commission (ITC)......................................................36
National Intellectual Property Law Enforcement Coordinating Council
(NIPLEC C) .................................................................................................................... 36
Strategy Targeting Organized Piracy (STOP!)..................................................................37
Issues for Congress........................................................................................................................38
U.S. Efforts to Promote IPR Through Trade Policy................................................................38
Effectiveness of the U.S. IPR Organizational Structure..........................................................39
Figure 1. 2007 Border Seizures of Counterfeit and Pirated Goods.................................................8
Table 1. Global Intellectual Property Filings Through the PCT, 2006-2007...................................5
Table 2. Estimated U.S. Trade Losses Due to Copyright Piracy, 2006-2007................................10
Table 3. 2006 Software Piracy Rates and Losses to U.S. Business Software Companies
From Selected Countries.............................................................................................................11
Table 4. Estimated Damages for PhRMA Member Companies From Data Exclusivity and
Patent Protection Violations.......................................................................................................12
Table 5. Summary of WIPO-Administered IPR Treaties..............................................................18
Table 6. Patent and Copyright Provisions in the TRIPS Agreement and U.S. FTAs.....................26
Table 7. FY2007 IPR Protection and Enforcement Dedicated Funding for U.S.
Author Contact Information..........................................................................................................40
Intellectual property rights (IPR) traditionally have been matters of national concern. Individual
nation states have developed IPR regimes reflecting their national needs and priorities. Over time,
intellectual property protection and enforcement have come to the forefront as a key international
trade issue for the United States, figuring prominently in the multilateral trade policy arena and in
regional and bilateral U.S. free trade agreements (FTAs).
The protection and enforcement of IPR in the United States and abroad is of key interest to
Congress. Intellectual property is an increasingly critical component of the U.S. economy.
Industries that rely on intellectual property protection in the United States claim to lose billions of
dollars each year due to overseas IPR infringement. There is also concern about the potential
health and safety consequences of counterfeit pharmaceutical drugs and other products, as well as
the link between terrorist groups and traffic in counterfeit and pirated goods. The role of Congress
in addressing IPR and trade-related issues stems from the U.S. Constitution, which provides
Congress with the power to regulate international trade. While authority to negotiate trade
agreements has been delegated periodically to the President, Congressional action is needed to
bring the agreements into force.
In promoting IPR through international trade policy, Congress may choose to consider whether or
not FTAs are an appropriate vehicle for boosting intellectual property protection and enforcement.
Congress may also balance IPR protection and enforcement with other public policy goals such as
access to medicine in poor or developing countries. Another issue that is before Congress is the
effectiveness of the current U.S. coordinating structure for promoting international IPR support. th
In the 110 Congress, legislation was enacted to establish a new entity to coordinate intellectual
property activities within the federal government. Legislation was also introduced calling for
greater U.S. international IPR enforcement efforts and increased prioritization of resources
devoted to such activities.
This report discusses the different kinds of IPR; forms of IPR infringement; importance of IPR to
the U.S. economy; estimated losses associated with IPR infringement; organizational structure of
IPR protection in multilateral, regional, bilateral; U.S. government agencies involved with IPR
and trade; and issues for Congress regarding IPR and international trade. This report will be
updated as events warrant.
This section provides definitions of the various kinds of intellectual property rights (patents, trade
secrets, copyrights, trademarks, and geographical indications) and intellectual property rights
misappropriation (infringement, piracy, and counterfeiting).
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 and may take the form of
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’s (WTO)
Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) 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, countries are obliged to
abide by WTO rules and their IPR enforcement practices can be challenged by other countries at
The Patent Act (35 U.S.C. 101 et seq) governs the issuance and use of patents in the United
States. Patents are granted for inventions of new products, processes, or organisms (known as
utility patents). Patents may also be granted for designs and plants. For an invention to be
patentable, it must be new, “non-obvious” (involving an inventive step), and have a potential
industrial or commercial application. The patent provides the holder with the exclusive right to
sell the invention for a period of 20 years, or to prevent the incorporation of the invention into
other products without the permission of the rights-holder. The patent right is based on the
proposition that inventors must be granted a temporary monopoly over their invention in order to
encourage innovation and to promote the expenditure of money on research and development.
The patentholder recoups his up-front costs through a temporary monopoly over sale of the
invention. In return for this economic rent, the patentholder must disclose the content of the
patent 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 Patent and Trademark Office (PTO) of the Department of Commerce.
A trade secret is any type of valuable information, including a “formula, pattern, compilation,
program device, method, technique, or process,” that derives independent economic value from
not being generally known or readily ascertainable and is subject to reasonable efforts by the 1
owner to maintain its secrecy. Examples of trade secrets include blueprints, customer lists, and
pricing information. While protection of patents and copyright is a matter of federal law, trade
secret protection is found also in state law. However, most states subscribe to the Uniform Trade
Secret Act (UTSA).
There are important differences between trade secrets and patents. Individuals do not have to
apply for trade secret protection as they would do with patents. Protection of trade secrets
originates immediately with the creation of the trade secret; there is no process for applying for or
registering trade secrets. Trade secret protection does not expire unless the trade secret becomes
known. In contrast, patent applicants must disclose information about their innovation to the PTO
in order to acquire a patent. Patents offer rights 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 or if the area of research is highly
1 Uniform Trade Secret Act, §1(4).
Protection of copyrights in the United States is based on the Copyright Act (17 U.S.C. 101, et
seq). Copyrights protect original expressions of authorship. Such protections include literary or
artistic works such as books, music, sound recordings, movies, paintings, architectural works, and
computer software and databases (though not individual bits of data). Traditionally, copyrights
differed from patents in that there was no claim to industrial applicability or novelty of the idea.
The expression of the idea, not the underlying idea, was being copyrighted. While some of the
criteria for copyrights differ from those of patents, the objective is the same; investments of time,
money, and effort to create work of cultural, social and economic significance should be protected
to encourage further creativity. U.S. law protects authorship for life 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 Copyright Office of the Library of Congress, or acquired through
creating and fixation of the work of authorship.
Trademark protection in the United States is governed jointly by state and federal law. The main
federal statute is the Lanham Act of 1946 (15 U.S.C. 1051, et seq). Also known as service marks,
trademarks permit the seller to use a distinctive name, mark, or symbol to identify and market a
product, service, or company. The trademark allows quick identification of the seller’s product,
and for good or ill, can become an indicator of a product’s quality. If for good, the trademark can
be valuable in the introduction of new products by conveying an instant assurance of quality. The
trademark is designed 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. For trademarks, distinctiveness is at a
premium because a trademark must capture the consumer’s imagination to be effective as generic
names of commodities cannot be trademarked. Trademark rights are acquired through use or
through registration with the PTO.
A related concept to trademarks is the geographic indication, which is also protected by the
Lanham Act. The geographic indication 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 region. Geographic indications are generally sought for agricultural
products, or wines and spirits. Protection for geographical indications is acquired in the United 2
States by registration with the PTO, through a process similar to trademark registration.
In the case of patents, infringement of a patent owner’s exclusive rights (as afforded by patent
laws) involves a third party’s unauthorized use of the patented device. As relates to international
trade, the greatest challenge to the patent right is infringement in foreign countries, or non-
observance by WTO member states to the minimal standards of the TRIPS Agreement. Copyright
infringement occurs when a third party engages in one of the acts requiring the copyright owner’s
2 For information on geographical indications and international trade negotiations, see CRS Report RS21569,
Geographical Indications and WTO Negotiations, by Charles E. Hanrahan.
permission without his consent, including reproducing, performing, making sound or visual
recordings of, and broadcasting the copyrighted work.
The term “piracy” has applications to both copyrights and trademarks. 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. With respect to trademarks, piracy involves 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.
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 3
originating from the genuine manufacturer. The purpose of counterfeit goods is to deceive
consumers about their origin and nature. Counterfeiting and copying of original goods is a major
challenge for trademarked products. The counterfeited product can be sold for a premium because
of its association of the original item, while reducing the sales of the original items. Furthermore,
consumer experience with a counterfeited good of inferior quality, can damage the reputation of
the trademark product. Popular examples of counterfeit products in fake fashionwear, such as
Louis Vuitton bags or Rolex watches, or fake pharmaceutical products, such as popular brand-
name prescription medicines.
A related issue is the imitation of labels and packaging of trademarked goods. In this situation, the
imitator uses a trademark that is confusingly similar to a well-known trademark in order to
benefit from the reputation of the product with which he is competing.
Intellectual property holdings that are protected by international agreements are concentrated in
firms headquartered in the United States and other developed economies. Developing countries
tend to be net importers of intellectual property.
For example, half of the approximately 5.6 million patents in force in 2005 were from companies 4
or inventors in Japan (28% of total) or the United States (21% of total). Through the Patent
Cooperation Treaty (PCT), an international patent filing system administered by the World
Intellectual Property Organization (WIPO), these two countries continued to represent a little
over half of all international patent filings in 2006 and 2007, with Germany in third place (see
3 Counterfeit goods should be distinguished from generic goods, i.e., in the case of generic forms of pharmaceutical
4 The most recently available year of data from WIPO for patents in force by country of origin is 2005.
In comparison, although developing countries accounted for the majority of signatories to the 5
PCT, they represented only 8% of all PCT international patent filings in 2006. However, patent
filings levels are not uniform among developing countries. In 2006, the industrializing developing
economies of Korea, China, India, Singapore, South Africa, Brazil, and Mexico represented over
96% of all patent filings from developing countries. These countries largely contributed to the
dramatic increase (28%) in patent filings from developing countries in 2006. Korea and China 6
particularly fueled this increase in patent filings.
In 2007, Korea and China continued to be among the top fifteen countries of origin for PCT
international applications in 2007. China experienced double-digit growth in patent filings from
2006 to 2007, the highest rate among any country. Other developing countries from which the
largest number of applications came were India, South Africa, Brazil, Mexico, Malaysia, Egypt, 7
Saudi Arabia, and Colombia.
Table 1. Global Intellectual Property Filings Through the PCT, 2006-2007
Country 2006 2007
Estimated % Change
United States 50,941 52,280 33.5% 2.6%
Japan 27,033 27,731 17.8% 2.6%
Germany 16,732 18,134 11.6% 8.4%
Korea 5,944 7,061 4.5% 18.8%
France 6,242 6,370 4.1% 2.1%
United Kingdom 5,090 5,553 3.6% 9.1%
China 3,951 5,456 3.5% 38.1%
Netherlands 4,529 4,186 2.7% -7.6%
Switzerland 3,577 3,674 2.4% 2.7%
Sweden 3,316 3,533 2.3% 6.5%
Italy 2,712,927 1.9% 7.8%
Canada 2,566 2,701.7% 5.5%
Australia 2,001 2,054 1.3% 2.6%
Finland 1,845 1,952 1.3% 5.8%
Israel 1,589 1,683 1.1% 5.9%
All Others 11,084 10,800 6.9% -2.6%
Totals 149,156 156,101 100.0% 4.7%
5 WIPO, “Record Year for International Patent Filings with Significant Growth from Northeast Asia,” press release,
February 8, 2007. Statistics on patent applications filed and patents granted by country office are available on the
WIPO website, http://www.wipo.org.
7 WIPO, “Unprecedented Number of International Patent Filings in 2007,” press release, February 21, 2008.
Intellectual property is an important source of comparative advantage for the United States.
Numerous industries in the United States rely on intellectual property for their businesses. Among
the industries that are dependant on patent protection are the aerospace, automotive, computer,
consumer electronics, pharmaceutical, and semiconductor industries. Copyright-based industries
include the software, data processing, motion pictures, publishing, and recording industries. Other
industries that indirectly benefit from IPR protection include retailers, traders, and transportation
businesses, which support the distribution of goods and services derived from intellectual 8
According to a 2004 study, U.S. industries that rely on intellectual property accounted for close to
40% of total growth achieved by the U.S. private sector in 2003. These industries comprised
about 20% of the private sector’s contribution to the U.S. gross domestic product (GDP) that
same year. With almost 18 million workers, the intellectual property industries are one of the
largest source of jobs in the United States; employees receive notably higher wages than 9
individuals in other sectors. More broadly, IPR-intensive industries also contribute positively to
the U.S. economy through productivity gains and other spillover effects.
The intellectual property industries contribute positively to the overall U.S. trade balance through
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 10
through royalties and license fees. In 2006, U.S. receipts from cross-border trade in royalties
and license fees (relating to patent, trademark, copyright, and other intangible rights) amounted to
$63.4 billion and payments totaled $26.4 billion. This resulted in a surplus of $37.0 billion, a 6% 11
percent increase from the previous of year.
Industry-specific figures also demonstrate the importance of the intellectual property to the U.S.
economy. For example, the business and entertainment software, motion pictures, recording, and
publishing industries, which rely on copyright protection, was estimated to constitute about $819
billion or about 7% of U.S. GDP in 2005. These industries accounted for nearly 13% of U.S.
economic growth and 4% of U.S. employment (5.4 million workers) in 2005. Foreign sales and 12
exports from these industries amounted to $110.8 billion in 2005.
8 Stephen E. Siwek, “Engines of Growth: Economic Contributions of the US Intellectual Property Industries,”
commissioned by NBC Universal, 2005, p. 2.
9 Ibid., p. 3.
10 Amanda Horan, Christopher Johnson, and Heather Sykes, “Foreign Infringement of Intellectual Property Rights:
Implications for Selected U.S. Industries,” Office of Industries Working Paper, U.S. International Trade Commission,
October 2005, p. 4.
11 Jennifer Koncz, Michael Mann, and Erin Nephew, “U.S. International Services,” Survey of Current Business, U.S.
Bureau of Economic Analysis (BEA), October 2007, pp. 53-54. This measure of cross-border trade in royalties and
license fees by U.S. companies include transactions with both affiliated and unaffiliated foreign companies.
12 Stephen E. Siwek, “Copyright Industries in the U.S. Economy: The 2006 Report,” prepared for the International
Intellectual Property Alliance (IIPA), November 2006, http://www.iipa.com, pp. 3-5.
The pharmaceutical industry, which is dependent on patents, provides another illustration of
intellectual property contributions to the U.S. economy. Domestic sales by research-based
pharmaceutical companies that are members of Pharmaceutical Researchers and Manufacturers of
America (PhRMA) were an estimated $189.6 billion in 2007, a 6.7% increase from the previous
year ($177.7 billion). PhRMA company sales abroad increased by 10.0% from $76.8 billion in 13
2006 to $81.9 billion in 2007. The U.S. pharmaceutical industry maintains a strong global
position, accounting for over 30% of value added in the global pharmaceutical market place in 14
Several factors contribute to the growing problem of IPR infringement. While the costs and time
for research and development are high, IPR infringement is associated with relatively low costs
and risks and a high profit margin. For instance, based on a survey of ten pharmaceutical
companies, the Tufts Center for the Study of Drug Development estimated that the cost for 15
developing a new drug cost was over $800 million on average. According to PhRMA, it takes
about 10 to 15 years of research and development to create a new drug. Pharmaceutical 16
companies collectively spent an estimated $55.2 billion for research and development in 2006.
In contrast, drug counterfeiters can lower production costs by using inexpensive, and perhaps
dangerous or ineffective, ingredient substitutes. The development of technologies and products
which can be easily duplicated, such as recorded or digital media, has led to an increase in
counterfeiting and piracy. Increasing Internet usage also 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 estimated to be relatively low.
Because of the secretive, illicit nature of IPR infringement, it is difficult to estimate the
magnitude of its impact on U.S. producers and exporters. However, data on seizures of
counterfeit and pirated goods can be obtained from customs authorities. One study by the
Organization for Economic Cooperation and Development (OECD) indirectly extrapolated
available customs data on seizures to conclude that worldwide trade in counterfeit and pirated
goods may have amounted to $200 billion in 2005. In particular, the study used the customs
information to estimate the probability that imports of particular goods from particular countries
would be pirated or counterfeit. The OECD estimate does not include the counterfeit and pirated
goods produced and consumed within a country and does not include infringing goods distributed
13 PhRMA, “Pharmaceutical Industry Profile 2008,” March 2008, http://www.phrma.org, p. 58.
14 National Science Foundation (NSF), “Science and Engineering Indicators 2008,” Chapter 6: Industry, Technology,
and the Global Marketplace, 2008, http://www.nsf.gov/statistics/seind06/, p. 21.
15 J.A. DiMasi, “Tufts Center for the Study of Drug Development Pegs Cost of a New Prescription Medicine at $802
Million,” press release, November 30, 2001. The study is available at http://csdd.tufts.edu/. Some contend that the
study overestimates actual research and development costs for creating a new drug; Public Citizen offers a critique,
accessible at http://www.publiccitizen.org.
16 PhRMA, “Pharmaceutical Industry Profile 2007,” March 2007, http://www.phrma.org, pp. 2 and 6.
over the Internet. If these figures were included, the trade estimate undoubtedly would be 17
Data on pirated and counterfeit seizures at the U.S. border, provided by the U.S. Department of
Homeland Security (DHS), shed light on U.S. trade in IPR infringement problem within the
United States. In 2006, the Customs and Border Protection (CBP) and Immigration and Customs
Enforcement (ICE) agencies of the DHS made 14,675 seizures, nearly double the 8,022 seizures
made in 2005. The domestic value of seizures totaled $155 million in 2006, a nearly 70% increase
from 2005 ($93 million). Compared to 2006, the total number of seizures in 2007 was lower at
13,657, but the domestic value of the seizures rose nearly a third to $197 million. In 2007, a top
priority for the CBP was seizing counterfeit imports that endanger the health and safety of
consumers, such as fake healthcare products, pharmaceutical products, and consumer 18
DHS provides data on counterfeit goods seized by category. Of the goods intercepted in 2007,
counterfeit footwear represented $77.8 million (40% of the total). Other popular items included
wearing apparel ($27.0 million in value, 14%); consumer electronics ($16.0 million, 8%);
handbags, wallets, and backpacks ($14.2 million, 7%); and watches and parts ($13.3 million,
7%). Seizures of counterfeit pharmaceuticals increased significantly, from $2.3 million in 2006
(1% of total) to $11.1 million in 2007 (6%) (see Figure 1).
Figure 1. 2007 Border Seizures of Counterfeit and Pirated Goods
Sunglasses and PartsHeadwear
All Other GoodsMedia
40%Phar ma c eutic als
Watches and Parts
Consumer Electronicsand Backpacks7%
Sources: CBP and L.A. Strategic Trade Center.
17 OECD, “The Economic Impact of Counterfeiting and Piracy, “Executive Summary, 2007, p. 4.
18 NIPLECC, “Report to the President and Congress on Coordination of Intellectual Property Enforcement and
Protection,” January 2008, pp. 74.
Of all U.S. trading partners, China continues to account for the majority of counterfeits
intercepted at the U.S. border. In 2007, seizures of goods originating from China represented 80%
of all seizures and $158.1 million in value. Other top trading partners from which IPR-infringing
goods were seized are Hong Kong, Taiwan, Pakistan, the United Kingdom, Egypt, Korea, India,
Canada, and Colombia.
U.S. industries that rely on IPR protection claim to lose billions of dollars in revenue annually
due to piracy and counterfeiting. In 2002, the CBP estimated that counterfeit goods cost U.S. 19
companies and industries about $200 billion in revenue loss and 750,000 in job loss each year.
Also in 2002, the U.S. Federal Bureau of Investigation (FBI) estimated that counterfeiting and 20
piracy resulted in U.S. business revenue losses between $200 million and $250 million annually.
Give the above estimates, the Coalition Against Counterfeiting and Piracy (CACP) asserts that a
conservative estimate for U.S. businesses’ annual revenue loss due to counterfeiting and piracy is 21
about $225 billion. More recent comprehensive estimates of the total losses experienced by U.S.
businesses due to all types of IPR infringement are not available. However, two intellectual
property-based sectors that have calculated the extent of infringement in their industries and
related costs are copyrights and pharmaceuticals. A discussion of estimated losses from these two
The International Intellectual Property Alliance (IIPA), a coalition of seven member associations
representing over 1,300 U.S. copyright-based companies, provides annual estimates of U.S. trade 22
loss associated with copyright infringements in selected countries. For 2007, the IIPA claimed
that copyright infringements in 43 countries resulted in an estimated $18.3 billion in trade losses
for the United States (see Table 2). China was the leading culprit in terms of trade losses due to
copyright piracy, contributing to at least $3.5 billion in trade losses in 2007. Russia was the 23
second largest source of trade losses, totaling nearly $2.6 billion that year.
19 CBP Press Release, “U.S. Customs Announces International Counterfeit Case Involving Caterpillar Heavy
Equipment,” May 29, 2002. Cited by LECG, LLC, “Economic Analysis of the Proposed CACP Anti-Counterfeiting
and Piracy Initiative,” November 27, 2007.
20 FBI Press Release, July 17, 2002, http://www.fbi.gov/pressrel/pressrel02/outreach071702.htm, Cited by LECG, LLC,
“Economic Analysis of the Proposed CACP Anti-Counterfeiting and Piracy Initiative,” November 27, 2007.
21 LECG, LLC, “Economic Analysis of the Proposed CACP Anti-Counterfeiting and Piracy Initiative,” November 27,
22The IIPA member associations are: Association of American Publishers (AAP), Business Software Alliance (BSA),
Entertainment Software Alliance (ESA), Independent Film and Television Alliance (I.F.T.A.), Motion Picture
Association of America (MPAA), and Recording Industry Association of America (RIAA).
23 IIPA, “2008 ‘Special 301 USTR Decisions: IIPA’s 2006 and 2007 Estimated Trade Losses Due to Copyright Piracy
(in millions of U.S. dollars) and 2006-2007 Estimated Levels of Copyright Piracy,” June 17, 2008,
Table 2. Estimated U.S. Trade Losses Due to Copyright Piracy, 2006-2007
(Millions of U.S. dollars)
Copyright Industry 2006 2007
Business software 9,141.0 13,004.0
Records and music 2,293.3 2,182.5
Motion pictures Not available Not available
Entertainment software 1,891.3 2,578.0
Books 548.5 525.0
Totals 13,873.6 18,289.5
Source: IIPA “Special 301” Report
IIPA predicts that U.S. trade losses due to copyright infringement may be higher than reported
because its estimates do not account for Internet piracy, which IIPA contends is an important 24
contributor to copyright piracy. There is a possibility that such IPR infringement loss estimates
actually may overestimate the extent to which sales of pirated and counterfeit goods displace
legitimate sales. The basic economic model employed in such estimates assumes that there is
perfect substitutability between pirated and legitimate goods, which would equate sales of pirated
goods to revenue losses of legitimate U.S. copyright businesses. Some analysts suggest that
legitimate firms face a competition threat only if the individuals purchasing counterfeit products
would be able and willing to purchase the legitimate product at the price offered when piracy is 25
not present. For consumers in poor developing countries, especially, this assumption may not be
There is not always a direct relationship between IPR infringement rates and the costs to U.S.
firms. The size of a country’s market and U.S. industries’ access to the market affect the extent to
which infringement rates translate into costs to U.S. IPR-based industries. For instance, the
United States had the lowest software piracy rate in the world in 2006 (21%). However, the
United States was also the largest contributor to piracy losses for the U.S. business software
industry because of the significant size of the domestic computer software market. Losses to the
software industry from U.S.-based piracy totaled $7.3 billion in 2006. By contrast, countries with
higher software piracy rates, nevertheless, had lower infringement costs to U.S. software firms
(see Table 3). The smaller sizes of the markets in these countries contributed to lower piracy-
related absolute losses stemming from these countries. The worldwide software piracy rate was
24 “The Copyright Industries in the International Intellectual Property Alliance (IIPA) Submit to USTR their 2007
Report on Piracy in 60 Countries/Territories,” press release, February 12, 2007, http://www.iipa.com.
25 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.
26 BSA, “Fourth Annual BSA and IDC Global Software Piracy Study,” May 2006, http://www.bsa.org/globalstudy/, pp.
Table 3. 2006 Software Piracy Rates and Losses to U.S. Business Software
Companies From Selected Countries
Country Piracy Rate Piracy Loss
(millions of U.S. dollars)
Zimbabwe 91% $2
Vietnam 88% $96
Pakistan 86% $143
China 82% $5,429
Russia 80% $2,197
Canada 34% $784
Denmark 25% $183
United States 21% $7,289
Motion Picture Piracy Losses: A Closer Look at the Numbers
Recent studies have focused on the economic damages sustained by specific copyright industries. A study conducted
by LEK Consulting for the MPAA asserted that the direct economic losses to major U.S. movie companies due to a
motion picture piracy was approximately $6.1 billion in 2005. Conversely, this figure can be viewed as an estimate of
the future gains that the could be obtained if piracy was reduced substantially.
The study found that 80% of U.S. motion picture studio losses resulted from piracy overseas, while 20% resulted from
piracy in the United States. China had the greatest motion picture piracy rate, with an estimated 90% of the motion
picture market considered to be illegitimate. U.S. film companies lost an estimated $244 million in revenue from
piracy in China. At 80%, Russia and Thailand had the second highest motion picture piracy rates, with losses totaling
$266 million and $149 million respectively. In terms of dollars losses, however, the leading sources of potential dollar
losses for U.S. businesses were Mexico ($483 million), the United Kingdom ($406 million), and France ($322 million), b
which had significantly lower rates of piracy than the former countries.
A subsequent study found that in addition to the direct losses faced by the motion picture industry, there are also
losses sustained by “downstream” industries, such as motion picture theatrical exhibitors or the home-video industry.
Accounting for these losses, the motion picture industry experiences $20.5 billion annually in lost output. Using
economic multipliers, the study estimated that 141,030 jobs would have been created in the United States annually if
motion picture piracy did not occur. This translates into $2.7 billion in lost earnings each year by U.S. workers. The
federal, state, and local governments would lose at least $422 million in tax revenues annually from lost personal
income, corporate income, and production taxes. This analysis is based on a Regional Input-Output Modeling System c
(RIMS), which is maintained by the U.S. Bureau of Economic Analysis (BEA). The study appears to be based on the
assumption that the extra revenue that would be obtained absent piracy would be directed toward increased film
a. “The Cost of Movie Piracy,”analysis prepared by LEK for the MPAA, obtained via electronic request from MPAA,
http://www.mpaa.org, p. 5.
b. Ibid., pp. 6-7.
c. Stephen E. Siwek, “The True Cost of Motion Picture Piracy to the U.S. Economy,”Institute for Policy Innovation:
Policy Report #186, September 2006, http://www.ipi.org, pp. 4-6, 8-9.
The World Health Organization (WHO) estimates that many countries in Africa, Asia, and Latin 27
America have areas where between 10% and 30% of medicines sold are counterfeit. The U.S. 28
FDA also estimates that at least 10% of drugs worldwide are counterfeit. In the United States
and many other developed countries, with relatively strong regulatory systems, the prevalence of
counterfeit drugs is low. According to U.S. customs data, pharmaceuticals accounted for only 1% 29
of all goods seized in 2006, with a domestic value of $2.2 million. Still, there is growing
concern about the vulnerability of the U.S. medicine supply and distribution chain, especially in
light of recent high-profile cases about counterfeit drugs entering the United States.
PhRMA provides annual estimates of U.S. pharmaceutical industry losses from foreign violations 30
of data exclusivity and patent protection. In its 2007 Special 301 submission to the USTR
(covering the period of October 2005 to September 2006), PhRMA contended that its member
companies sustained damages totaling an estimated $21.7 million from data exclusivity and 31
patent violations in 24 countries (see Table 4). Damages reported in the 2007 submission were
nearly double those reported in the prior year’s submission (covering October 2005 to September
sales declined from the 2006 submission to the 2007 submission. At the time of reporting for
barriers associated with intellectual property protection and market access.
Table 4. Estimated Damages for PhRMA Member Companies From Data Exclusivity
and Patent Protection Violations
Oct. 2004 - Sept. 2005 Oct. 2005 - Sept. 2006
Total Damages $13.9 million $21.7 million
Total Sales $74.6 million $172.1 million
Damages as a Percentage of Sales 19% 13%
Source: PhRMA 2006 and 2007 Special 301 Submissions.
27 WHO, “Counterfeit Medicines,” fact sheet, revised November 14, 2006, http://www.who.int/mediacentre/factsheets/
28 U.S. FDA, “Counterfeit Drugs Question and Answers,” July 2003, http://www.fda.gov/oc/initiatives/counterfeit/
29 U.S. CBP and L.A. Strategic Trade Center, “FY2006 Top IPR Commodities Seized,” November 7, 2006,
http://www.cbp.gov. Because of the costs and resources required to conduct physical inspections, many counterfeit
products escape inspection, making it difficult to determine the fraction of pirated goods caught. As a result, seizure
statistics from the DHS agencies do not reflect on the overall size of the counterfeit market and total losses.
30 PhRMA’s calculations of damage due to violations of data exclusivity are based on a five-year data protection
period; any sales not made by the patent holder within the data exclusivity period were regarded as data exclusivity
damages. For damages from patent protection violations, PhRMA used a ten-year patent protection period and
considered any sales not made by the patent holder within that period to be damages. For some countries, PhRMA did
not report damages because data was not available at the time.
31 Economic losses in PhRMA’s annual Special 301 submission are not reported on calendar-year basis because fourth
quarter economic data is not available at the time the report is issued.
32 PhRMA, “Special 301 Submission for 2007,” Appendix: Damage Estimate Methodology, p. v.
33 PhRMA, “Special 301 Submissions for 2008.”
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 standards and enforcement. Increasingly, the United States has integrated IPR policy in its
international trade policy activities, pursuing enhanced IPR laws and enforcement through the
WTO, regional and bilateral trade agreements, and national trade laws.
At the center of the present multilateral trading system is the World Trade Organization (WTO),
an international organization established in 1995 as the successor to the General Agreements on
Tariffs and Trade (GATT). The WTO was established as the result of the Uruguay Round of trade
negotiations (1986-1994), which resulted in numerous agreements on trade in goods, services,
investment and other non-tariff barriers to trade. One of the Uruguay Round agreements was the
Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The TRIPS
Agreement sets minimum standards on intellectual property rights protection and enforcement
with which all WTO member states must comply. The United States, the 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 them under the World Intellectual Property Organization (WIPO) (see below) instead.
However, developing countries acceded, after being granted delayed compliance periods, and
after achieving negotiating goals on other issues such as textiles and clothing, and savoring the
prospect of operating under a rules-based trading system.
While previous international agreements on intellectual property rights continue to exist (see
Table 4), 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 parties of other WTO members no less favorably in
terms of IPR protection than the party’s own nationals) and most-favored-nation treatment (any
advantage in IPR protection granted to the party 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: copyrights, trademarks, geographical indications, industrial
designs, patents, layout of circuitry design, trade secrets, and test data. The TRIPS Agreement
provisions build on several existing IPR treaties administered by the WIPO (discussed below).
Another part 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 the implementation of the agreement and transition arrangements were devised for
developing countries. Finally, the agreement provides for the resolution of disputes under the
Uruguay Round Agreement’s Dispute Settlement Understanding (DSU). The binding nature of
the DSU, with the possibility of the withdrawal of trade concessions (usually the reimposition of
tariffs) for non-compliance, sets this agreement apart from previous IPR treaties that did not have
effective dispute settlement mechanisms. In April 2007, the United States filed two WTO dispute
settlement cases against China, alleging inadequacies in China’s IPR laws and its barriers to 34
market access for U.S. copyright businesses. China has called on the United States to withdraw 35
its complaints, asserting that it has made progress in address its IPR shortcomings.
The TRIPS Agreement also seeks a balance of rights and obligations between the private right,
enumerated above, and the obligation “to secure social and cultural development that benefits 36
all.” 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 to assist them in
establishing a viable technology base. Developed countries report annually on their efforts to
encourage technology transfer (LDCs).
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 mechanism into compliance with the 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 (LDCs), the phase-in period
was set at 10 years (January 1, 2006), and for pharmaceuticals, the compliance period was later 37
extended to 2016.
34USTR, “United States Files WTO Cases Against China Over Deficiencies in China’s Intellectual Property Rights
Laws and Market Access Barriers to Copyright-Based Industries,” press release, April 9, 2007, http://www.ustr.gov.
See also CRS Report RL33536, China-U.S. Trade Issues, by Wayne M. Morrison.
35 Liza Porteus Viana, “Industry Losing Faith in WIPO: Debates US WTO Cases Against China,” Intellectual Property
Watch, March 28, 2008.
36 Pascal Lamy, “Trade-Related Aspects of Intellectual Property Rights - Ten Years Later,” Journal of World Trade,
October 2004, p. 925.
37 “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.
In agreeing to launch the Doha Round of WTO trade negotiations, trade ministers adopted a 39
“Declaration on the TRIPS Agreement and Public Health” on November 14, 2001. 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 least developed countries (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 Declaration directed the WTO members to formulate a solution to a corollary
concern, the use of compulsory licensing by countries with insufficient or inadequate
manufacturing capability. Compulsory licenses are issued by governments to authorize the use or
production of a patented item by a domestic party other than a patent holder. They are authorized
by Article 31 of TRIPS, which places certain limitations on their use, scope, duration. A provision
that predominantly restricted production authorized by compulsory license to the domestic market
became the focal point of the negotiations because it, in effect, conveys the right of compulsory
licensing only to countries with the capability to manufacture a given product. Countries without
a domestic manufacturing capability were essentially precluded from using this flexibility of the
On the eve of the Cancun Ministerial in August 2003, WTO members agreed on a Decision40 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 least developed countries (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. The amendment must be ratified by two-thirds of the 152
WTO member states. Until then, the 2003 waiver continues in force. To date, 43 countries (the
United States, Switzerland, El Salvador, South Korea, Norway, India, the Philippines, Israel,
Japan, Australia, Singapore, Hong Kong, China, Mauritius, Egypt, Mexico, and the 27 countries 41
of the European Union) have ratified the amendment. The system established by the WTO
allows LDC 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 manufacturing and exported subject to
various notification requirements, quantity and safeguard restrictions. While several exporting
countries have established laws and procedures for implementing this system, only Rwanda has
38 See also CRS Report RL33750, The WTO, Intellectual Property Rights, and the Access to Medicines Controversy, by
Ian F. Fergusson.
39 Declaration on the TRIPS Agreement and Public Health, (WT/MIN(01)/DEC/2), November 14, 2001, available at
40 “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/
41 “Members accepting amendment of the TRIPS Agreement,” http://www.wto.org/english/tratop_e/trips_e/
availed itself to use the system to import HIV/AIDS medicines from a generic manufacturer in 42
Intellectual Property Protection and Development
The controversy over the relationship between IPR and development was engaged by the advent of the TRIPS
Agreement, which for the first time placed IPR obligations on developing countries. Some hold that expansion of IPR
is an obstacle to growth and development in less advanced countries, while others, with a diametrically opposing
view, maintain that IPR are beneficial to both developed and developing countries.
Some IPR critics believe that a strong IPR regime may reduce developing countries’ access to technology from
advanced countries by imposing higher fees for technology licenses and production right, limiting their innovation and
economic growth and development. For instance, Japan, Singapore, Taiwan, and South Korea enhanced their
technological abilities and developed their economies through “reverse engineering” of foreign technologies.
Others claim that IPR promote technology transfer through increased trade, foreign investment, and licensing in the
long-run by making a country more attractive to foreign partners. A 2002 OECD study concluded that stronger IPR
laws, particularly enhanced patent standards, may be associated with increased foreign direct investment (FDI) and a
trade for developing countries over time, with variation by industries and level of development. For instance, India
experienced an increase in foreign investment and technology transfer once it expanded its patent protection. China
offers a counterexample of a country with a weak IPR regime but high FDI and trade levels.
There is also evidence that IPR’s impact on developing countries may vary by the level of development. One study
suggests that IPR protection may offer more benefits for the more industrialized developing countries, such as Brazil
and India, compared to other developing countries. Such industrializing economies could experience economic b
growth of as much as 0.5% annually through increased trade, FDI, and licensing. Another study finds that rapid
economic growth is associated with weak intellectual property regimes, but that developing countries with higher c
levels of per capita income may benefit economically from stronger IPR regimes.
There is also concern that strengthened patent protection may drive up prices for medicines or delay the entry of
generic drugs into the market, reducing access to HIV/AIDS treatments and other drugs. IPR supporters argue that
strong IPR is critical to creating incentives for pharmaceutical innovations and suggest that reduced prices are no
guarantee that needed goods will make it into the hands of individuals in developing countries due to political
corruption, poverty, and poor social infrastructure.
a. OECD, “The Impact of Trade-Related Intellectual Property Rights on Trade and Foreign Direct Investment in
Developing Countries,” May 28, 2003, http://www.oecd.org, p. 21.
b. Keith E. Maskus, Intellectual Property Rights in the Global Economy, Institute for International Economics,
Washington, DC, August 2000.
c. Commission on Intellectual Property Rights (CIPR), Integrating Intellectual Property Rights and Development
Policy, September 2002.
In addition to the WTO, the other main multilateral venue for addressing IPR issues is WIPO, a
United Nations agency. Established in 1967, 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 Industry 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
42 “Canada Issues Compulsory License For HIV/AIDS Drug Export To Rwanda, In First Test Of WTO Procedure,”
Bridges Weekly Trade News Digest, September 26, 2007, http://www.ictsd.org/weekly/07-09-26/story2.htm.
administer a group of IPR treaties which put forth minimum standards for member states (shown
in Table 5). All international IPR treaties, save TRIPS, are administered by WIPO.
In order 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 43
(WPPT) in 1996. Recent WIPO efforts have focused on patent law. In June 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 May 2001
for the Substantive Patent Law Treaty (SPLT), which targets issues specifically related to patent
grants, but stalled in 2006.
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.
With the emergence of the TRIPS Agreement, some observers question the relevance of WIPO.
However, others contend that the TRIPS Agreement has given WIPO a new and stronger role.
Through a 1996 agreement between the WTO and WIPO, the two organizations have agreed to
work closely together to ensure the implementation of the TRIPS Agreement by member states 44
through legal and technical assistance and technical cooperation. In 1998, WIPO and WTO
began a joint initiative based on the 1996 agreement to enhance their coordination of technical
cooperation activities in order to assist developing countries, in particular, to fulfill their TRIPS 45
43 These WCT and WPPT frequently are referred to as the WIPO Internet Treaties.
44 “Agreement between the World Intellectual Property Organization and the World Trade Organization,”
45 WIPO, “Intellectual Property Handbook,” http://www.wipo.org, p. 359.
Table 5. Summary of WIPO-Administered IPR Treaties
Treaty Date Concluded Provisions
Intellectual Property Protection Treaties
Paris Convention for the Protection of Industry Property (Paris 1883 (entered into Protects industrial property (includes patents, marks, industrial designs,
Convention) force 1884) utility models, trade names, and geographic indications)
Berne Convention for the Protection of Literary and Artistic Works 1886 (entered into Protects literary and artistic works, providing right to control and receive
(Berne Convention) force 1886) payments for use
Madrid Agreement for the Repression of False and Deceptive Indications 1891 Requires States to seize imported goods with false/deceptive indications of
of Source on Goods (Madrid Agreement - Indications of Source) source or to prohibit importation of such goods; open to States party to
Paris Convention (1883)
Rome Convention for the Protecting of Performers, Producers of 1961 Protects rights of performers against certain acts to which they have not
Phonograms and Broadcasting Organizations (Rome Convention) agreed; protects rights of producers of phonograms, and broadcasting
organizations to authorize/prohibit certain acts; open to States party to
Berne Convention (1886)
iki/CRS-RL34292Convention for the Protection of Producers of Phonograms Against Unauthorized Duplication of their Phonograms (Phonograms Convention) 1971 Protects producers of phonograms against unauthorized reproduction of their phonograms or importation of duplications for public distribution
g/wBrussels Convention Relating to the Distribution of Programme-Carrying 1974 Protects against the unauthorized distribution of program-carrying signals
s.orSignals Transmitted by Satellite (Brussels Convention) transmitted by satellite
Nairobi Treaty on the Protection of the Olympic Symbol (Nairobi Treaty) 1981 Protects Olympic symbol against unauthorized commercial uses
://wikiTreaty on the International Registration of Audiovisual Works (Film 1989 Establishes International Register for Audiovisual Works
Treaty on Intellectual Property in Respect to Integrated Circuits 1989 Protects layout designs which display electrical components of an integrated
(Washington Treaty) circuit
Trademark Law Treaty (TLT) 1994 Streamlines national and regional trademark registration processes
WIPO Copyright Treaty (WCT) 1996 (entered into Special agreement under Berne Convention; grants exclusive rights to
force 2002) owners of copyright in computer programs and compilations of data/other
WIPO Performances and Phonograms Treaty (WPPT) 1996 (entered into Grants exclusive rights to performers and phonogram producers
Patent Law Treaty (PLT) 2000 (entered into Aims to harmonize and streamline national and regional patent application
2005) procedures and patents
Singapore Treaty on the Law of the Trademarks 2006 (not yet in Builds on TLT (1994); aims to harmonize trademark registration
force) procedures; has wider scope (includes communication technology
Treaty Date Concluded Provisions
Global Protection System Treaties
Budapest Treaty on the International Recognition of the Deposit of 1977 (entered into Special agreement under Paris Convention (1883); requires States to
Microorganisms for the Purposes of Patent Procedure (Budapest Treaty) force 1980) recognize the deposit of a microorganism with any “international depositary
Madrid Agreement Concerning the International Registration of Marks 1891 Requires seizure of imported goods with false/deceptive indication of
(Madrid Agreement - Marks) source or prohibition of importation of such goods; open to States party to
Paris Convention (1883)
Hague Agreement Concerning the International Registration of Industrial 1925 (entered into Allows protection of industrial designs in all member states on basis of
Designs (Hague Agreement) force 1928) single application with WIPO; three acts currently in force: 1934, 1960, and
Locarno Agreement Establishing an International Classification for 1968 (entered into Establishes a classification for industrial designs; open to States party to
Industrial Designs force 1971) Paris Convention (1883)
Patent Cooperation Treaty (PCT) 1970 (entered into Establishes an international patent filing system; allows a single international
force 1978) patent application to have legal standing in all countries signatory to PCT;
open to States party to Paris Convention (1883)
g/wProtocol Relating to the Madrid Agreement (Madrid Protocol ) 1989 (entered into force 1995) Relates to Madrid Agreement (1891); seeks to make Madrid system more amenable to domestic laws of certain who are not yet signatories to Madrid
s.orAgreement; open to States party to Paris Convention (1883)
://wikiNice Agreement Concerning the International Classification of Goods and 1957 (entered into Establishes a classification of goods and services in order to register
httpServices of the Purposes of the Registration of Marks (Nice Agreement) force 1961) trademarks and service marks; open to States party to Paris Convention
Lisbon Agreement for the Protection of Appellations of Origin and their 1958 Provides international protection for geographical indications
International Registration (Lisbon Agreement)
Strasbourg Agreement Concerning the Industrial Patent Classification 1971 (entered into Establishes the International Patent Classification (IPC); open to States party
(Strasbourg Agreement) force 1975) to Paris Convention (1883)
Vienna Agreement Establishing Classification of the Figurative Elements of 1973 (entered into Establishes a classification for marks which consist/contain figurative
Marks (Vienna Agreement) force 1985) components; open to States party to Paris Convention (1883)
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. In general, the United
States has viewed the TRIPS Agreement and WIPO-administered treaties as a minimum standard
and has pursued higher IPR protection and enforcement levels through regional and bilateral
Under Trade Promotion Authority (TPA), Congress delegates its constitutional authority to
regulate foreign commerce to the President to negotiate and enter into certain free trade
agreements (FTAs), and to have their implementing bills considered under expedited legislative
procedures (no amendment, up-or-down vote), provided the President follows the guidelines,
objectives, reporting, and consultation requirements mandated by Congress. IPR have become
important negotiating objectives in grants of trade promotion authority; the most recent extension
of that authority expired on July 1, 2007.
IPR negotiating objectives were first enacted in trade negotiating authority (then known as fast-
track authority) by the Omnibus Trade and Competitiveness Act of 1988 (P.L. 100-418). The act
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 GATT and other existing intellectual property conventions. This negotiating mandate led to
the establishment of the TRIPS Agreement during the Uruguay Round and the IPR provisions in
North American Free Trade Agreement (NAFTA).
FTA negotiations in this century have been conducted under the Trade Promotion Authority Act
of 2002 (P.L. 107-210). In the intervening period since the 1988 Act, the TRIPS agreement came
into force and the IPR provisions of NAFTA became the template for further bilateral or regional
FTAs. Thus the focus of IPR negotiating objectives shifted from creating to strengthening the IPR
trade regime. One broad objective was to apply the existing IPR protection to digital media. The
negotiating objectives contained provisions to extend IPR protection to new and emerging
technologies and to methods of transmission and dissemination. The language called for
standards of enforcement to keep pace with technological change and to allow rights-holders the
legal and technological protections for their works over the Internet and other new media.
A second broad objective was to negotiate trade agreements in terms of IPR that “reflect a 46
standard of protection similar to that found in U.S. law.” This phrase opened the door to the
negotiation of provisions that go beyond the level of protection provided in the TRIPS agreement.
Often referred to as “TRIPS-plus” provisions, these obligations include expanding coverage to
new sectors; establishing more extensive standards of protection; and reducing the flexibility
options available in TRIPS. Some of the new measures also address technological innovations 47
that have come about since the TRIPS Agreement.
46 P.L. 107-210, Sec. 2102(b)(4).
47 The European Union also plans to pursue what are considered to be TRIPS-plus provisions by some in future
Economic Partnership Agreements with African, Caribbean, and Pacific countries.
With the change of control in the 110th Congress, Democrats called for changes in the
administration’s trade negotiating strategy in return for support of future trade agreements. In
May 2007, the Administration and Congressional leadership concluded a bipartisan agreement on
trade policy that addressed Democratic concerns about the implications of enhanced IPR on
developing countries’ ability to meet public health needs. In particular, Congressional leadership
sought to ensure that pending FTAs allowed trading partners to have enough flexibility to meet
their IPR obligations and to be able to promote access to life-saving medicines, while otherwise
meeting their international IPR protection and enforcement obligations. IPR language previously
negotiated in the FTAs with the developing countries of Peru, Panama, and Colombia (discussed
below) subsequently were modified to reflect the agreement. Because Korea is an industrialized
country, the United States did not significantly scale-down the patent protection obligations in the
U.S.-Korea FTA. What follows is a discussion of some of the central patent and copyright
standards sought in FTAs that are currently in force or were modified by the White House and 48
Congress (see Table 6).
Patent protection is arguably the most contentious area of U.S. FTA negotiations on IPR issues.
While the United States and other developed countries advocate for strong patent protections in
order to promote innovation, there is concern that such stringent protections may delay
developing countries’ access to generic drugs and increase prices. Many of the FTAs in force
include TRIPS-plus patent provisions, the most prominent of which are patent term length
extensions, linkages between regulatory authority and patent status, data protection, compulsory
licensing and parallel importation. The 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. Pharmaceutical industry advocates express concern that this scale-49
down in patent protection in these FTAs may set a precedent for future FTA negotiations.
Many FTAs include provisions for mandatory patent term length extensions beyond the TRIPS
Agreement obligation of patent protection terms of twenty years from the filing date. These FTAs
allow for extensions in cases of “unreasonable” delays in the issuance of patents due to the
regulatory review or administrative process. Patent holders contend that such measures enhance
the ability of rights-holders to recoup the costs of research and development of new products.
However, there is concern that patent terms extensions may delay the entry of generic drugs into a
market. In a scale-down from TRIPS-plus obligations, FTAs with Peru, Colombia, and Panama
state that patent term restorations for pharmaceutical products are optional.
48 For a more detailed discussion of the differences between the TRIPS Agreement and regional FTAs that are in force,
see CRS Report RL33205, Intellectual Property and the Free Trade Agreements: Innovation Policy Issues, by John R.
49 Inside US Trade, “Brand-Name Industry Alarmed at IPR Precedent of FTA Template,” May 18, 2007.
In general, the term “patent linkage” refers to the attachment of regulatory approval for the
marketing of a drug with the status of a patent. If a patent exists, the FDA and its counterparts in
other countries may not grant marketing approval for a generic version of a drug that is patented
in the country without the permission of the patent holder. Patent linkage is a common provision
in the trade agreements obtained by the United States. This presents a departure from TRIPS,
under which generic drug manufacturers are able to apply for marketing approval without the
patent owner’s permission and prior to the expiration of the patent; this may reduce the time it 50
takes for generic drugs to enter a market once the patent expires. In light of developing country
concerns about delays in access to generic versions of drugs, FTAs signed with Peru, Panama,
and Colombia do not tie marketing approval for a generic drug with the patent status of its brand
In cases where the patent holders must submit undisclosed data regarding the safety or
effectiveness of new pharmaceutical or agricultural products in order to market them, the TRIPS
Agreement requires members to take measures to protect such data from disclosure and unfair
commercial use. The TRIPS agreement does not prescribe any time period for this protection.
Recent U.S. FTAs take these standards a step further, generally requiring a five-year period of
marketing exclusivity for the patent holder, which typically begins from the date the product is
approved in the country. Under this TRIPS-plus provision, generic drug manufacturers who want
to market and distribute a generic version of a drug while the data exclusivity period is in effect
must conduct their own clinical trials and submit their own findings to the national drug
regulatory authority; they cannot rely on the findings submitted by the patent holder. Some critics
contend that such provisions may raise the cost of manufacturing generic versions of patented
drugs, as well as delay access to generic forms of drugs. The FTAs with Peru, Panama, and
Colombia now include provisions that may reduce data exclusivity terms of five years by a 51
minimum of six months in practice.
A compulsory license is an authorization by a government for third parties (such as a company or
the government itself) for the manufacture or use of a product under patent without the
permission of the rights- holder. The TRIPS Agreement permits signatories to issue compulsory
licenses for patented devices and provide compensation to the owner of the patent and does not
limit the situations in which such licenses may be issued. The third party must have attempted to
obtain permission from the patent holder, although this requirement is waived in times of national
emergency or other extenuating circumstances. U.S. FTAs with Australia and Singapore limit
attaining compulsory licenses only for domestic use and to situations of remedying antitrust
violations or in situations of public non-commercial use, national emergency, or other cases of
50 While TRIPS does not directly speak to the rights of generic drug manufacturers in obtaining marketing approval for
a generic drug before the expiration of the patented drug, Article 30 of TRIPS permits exceptions of patent rights for
activities such as “research, prior user rights, and pre-expiration testing.”
51 For example, under the Peru FTA, if a company files to market a new drug in Peru after making an initial filing in
another country, such as the United States, and Peru approves the drug within six months of the filing, the data
exclusivity period begins at the time the drug was approved in the country of the initial filing, not Peru.
extreme need. Also under these FTAs, the patent holder is under no obligation to provide test
data, technical know-how or other undisclosed information for the patent subject to compulsory
license. The compulsory license provisions have not been included in FTAs with developing
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 IPRs, which governs the
extent of IPR after the first sale. Under a national system of exhaustion practiced in the United
States, IPR are exhausted domestically after the first sale, but not abroad, thus prohibiting trade in
those goods without permission of the rights-holder. Under an international system, IPR are
exhausted at the first sale for any destination, and such goods can be exported freely. Article 6 of
the 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. Some developing countries contend that parallel importation
is an alternative method for governments to increase access to medicines in the absence of a 52
compulsory license. Pharmaceutical companies have voiced concerns that this practice threatens
their ability to engage in price differentiation between different markets. U.S. FTAs negotiated
with Australia, Singapore, and Morocco disallow parallel importing of patented products.
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.
52 GAO Report 07-1198, “U.S. Trade Policy Guidance on WTO Declaration on Access to Medicines May Need
Clarification,” September 2007, p. 19.
Biodiversity and Traditional Knowledge
International trade negotiations increasingly have focused on the protection of plant and animal inventions, 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; 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 intellectual property and protecting these resources through an IPR framework.
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, some other system (“sui generis”), 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, Traditional Knowledge, and Folklore (IGC).
India, Brazil, and Peru, among other countries, contend that patent applicants should be required to disclose the
source of genetic materials, including plant life and traditional knowledge, before obtaining patents. The United States
and the European Union have advocated for national systems in which companies are granted permission to research
genetic materials and are obligated to share benefits from patents derived from those genetic products.
Some earlier U.S. FTAs have required signatories to provide protection for plants, animals, and plant varieties. The
recent 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 the three FTAs state the signatories’ recognition of the importance of biodiversity and
traditional knowledge and pledge the countries to work together to address these issues through the IGC.
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 does not mention any
obligations regarding rights-management information, which is “electronic information that 53
identifies a protected work, its author, and terms and conditions of use,” perhaps 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.
While patent protection has experienced policy shifts in the FTAs with Peru, Panama, and
Colombia, copyright protection provisions have remained fairly consistent through the FTAs. In
general, FTA signatories are obligated to provide an additional twenty years of copyright
protection. This brings the minimum copyright term to seventy years from the death of the author
or authorized publication, compared to fifty under the TRIPS Agreement. Responding to
technological innovations not discussed in the TRIPS Agreement, many of the FTAs require
trading partners to outlaw circumvention of copyrighted works. These provisions build on the 54
U.S. Digital Millennium Copyright Act (DMCA) of 1998. Also based on the DMCA, many
53 CRS Report RL33205, Intellectual Property and the Free Trade Agreements: Innovation Policy Issues, by John R.
54 The DMCA (P.L. 105-304) prohibits disabling technological protection measures designed to protect copyright
works through activities such as descrambling or decrypting copyrighted workers.
FTAs contain provisions that regulate the liability of Internet service providers (ISPs) for 55
copyright infringement that occurs within their networks. Under the FTAs, ISPs are provided
limited immunity from copyright liability in certain kinds of infringing activities if they comply
with regulations. For instance, ISPs must block access to or remove infringing materials as soon
as they are aware of the infringement. Copyright holders argue that it is necessary for ISPs to
assist in enforcing copyright for copyright laws to be effective. However, critics claim that these
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.
55 For additional information on DMCA provisions, see CRS Report RL32037, Safe Harbor for Service Providers
Under the Digital Millennium Copyright Act, by Brian T. Yeh and Robin Jeweler.
Table 6. Patent and Copyright Provisions in the TRIPS Agreement and U.S. FTAs
Intellectual TRIPS Provisions General TRIPS-Plus Provisions in FTAs Scale-down of TRIPS-Plus Standards
Patent term No provisions Mandatory extensions in cases of unreasonable Optional extensions in cases of unreasonable
extensions delays in patent grants/regulatory approval delays in patent grants/regulatory approval
Jordan (Article 4.23.a), NAFTA (Article 1709.12)
Chile (Article 17.9.6; 17.9.2a), Singapore (Article 16.7.7; Peru (Article 16.9.6), Panama (Article 16.9.6),
18.8.4a), Australia (Article 17.9.8; 17.10.4), Morocco Colombia (Article 16.9.6)
(Article 15.9.7; 15.10.3), CAFTA-DR (Article 15.9.6;
15.10.2), Bahrain (Article 14.8.6),Oman (Article 15.8.6),
Korea (Article 18.8.6)
Market approval No provisions National regulatory authorities cannot provide Eliminates mandate that regulatory authorities
linked to patent NAFTA (no mention), marketing approval for a generic version of a cannot approve a generic drug for marketing
status patented drug without permission from rights-if patent for drug in place
holder; also requires notification of rights-holder if Peru (Article 16.10.4), Panama (Article 15.10.4),
iki/CRS-RL34292Jordan (no linkage, but patent owner must be notified if another entity is seeking marketing marketing permitted Colombia (Article 16.10.4)
g/wapproval for generic version of patented product, Chile (Article 17.10.2b), Singapore (16.8.4c),Australia
s.orArticle 4.23.b) (Article 17.10.4), Morocco (Article 15.10.4), CAFTA-DR
leak (Article 15.10.2), Bahrain (Article 14.9.4), Oman
(15.9.4), Korea (Article 18.9.5)
://wikiProtection for Members must protect data from unfair Provides for at least five years of data exclusivity Provides for at least five years of marketing
httpundisclosed test or commercial use (Article 39.3) from date of approval in country for exclusivity from date of approval in country of
other data Jordan (Article 4.22) pharmaceuticals that contain new chemical products first filing if new drug is granted marketing
NAFTA (Article 1711.6), Bahrain (Article 14.9.1), Oman approval within six months in country of second filing
(Article 15.9(1-2), CAFTA-DR (Article 15.10.1),
Singapore (Article 16.8(1-3)), Australia (Article 17.10.1), Peru (Article 16.10.2), Panama (Article 15.10.4),
Morocco (Article 15.10.1), Chile (Article 17.10.1), Korea Colombia (Article 16.10.2)
Issuance of Some restrictions in issuance of compulsory Limits issuance of compulsory license to specific Not discussed
compulsory licenses licenses; circumstances under which licenses can cases: Correcting anti-competitive practices, public Chile (no mention), Morocco (no mention),
be issued not limited (Article 13) non-commercial contexts, national emergencies, and CAFTA-DR (no mention), Bahrain (no mention),
NAFTA (Article 1709.10), other extremely urgent situations Oman (no mention)
Jordan (Article 4.20), Singapore (Article 16.7.6), Peru (no mention), Panama (no mention),
Australia (Article 17.9.7) Colombia (no mention), (no mention)
Intellectual TRIPS Provisions General TRIPS-Plus Provisions in FTAs Scale-down of TRIPS-Plus Standards
Parallel importing TRIPS will not be used to discuss IPR exhaustion Parallel importation can be restricted or prohibited Not discussed
of patented (Article 6) NAFTA (Article 1709.5, 1709.9), Singapore (Article Peru (no mention), Panama (no mention),
products Jordan (no mention), Chile (no mention), CAFTA-DR 16.7.2), Morocco (Article 15.9.4), Australia (Article Colombia (no mention), Korea (no mention)
(no mention), Bahrain (no mention), Oman (no 17.9.4)
Biodiversity and Members may exclude plants and animals from Countries shall make patents available for plants and Members may exclude plants and animals
traditional patentability (micro-organisms and non-animals from patentability, but shall take reasonable
knowledge biological and micro-biological processes must Morocco (Article 15.9.2, plants and animals mentioned, effort to provide patent protection for plants
be eligible for patents); must provide protection plant varieties are not mentioned) or animals and maintain protection once
of plant varieties (Article 27.3(b)) offered
NAFTA (Article 1709.3), Bahrain (Article 14.8.(1-2)), Chile (Article 17.9.2, mentions plants but not
Oman (Article 15.8.2, plants not discussed), animals), CAFTA-DR (Article 15.9.2), Peru (Article
Jordan, (no mention), Singapore (no mention), 16.9.2), Panama (Article 15.9.2), Colombia (Article 16.9.2)
Australia (no mention), Korea (no mention)
g/wRights-management Not discussed Outlaws removal or alternation of information
leakNAFTA (no mention), Jordan (no mention) Chile (Article 17.5.6), Australia (Article 17.4.8), Singapore (Article 16.4.8), Morocco (Article 15.5.9), CAFTA-
DR (Article 15.5.8), Bahrain (Article 14.4.8), Oman (Article 15.4.8), Peru (Article 16.7.5), Panama (Article
://wiki15.5.8), Colombia (Article 16.7.5), Korea (Article 18.4.8)
httpTerm of protection No less than 50 years from authorized No less than 70 years from death of author or authorized publication
publication (Article 12) Chile (Article 17.5.4), Singapore (Article 16.4.4), Australia (Article 17.4.4), Morocco (Article 15.5.5), CAFTA-
NAFTA (Article 1705.4), Jordan (no mention) DR (Article 15.5.4), Bahrain (Article 14.4.4), Oman (Article 15.4.4), Peru (Article 16.5.5), Panama (Article
15.5.4), Colombia (Article 16.5.5), Korea (Article 18.4.4)
Circumvention of Not discussed Signatories must agree to prohibit circumvention
copyrighted work NAFTA (no mention) Jordan (Article 4.6), Chile (Article 17.5.5), Singapore (Article 16.4.7), Australia (Article 17.4.7), Morocco
(Article 15.5.8), CAFTA-DR (Article 15.5.7), Bahrain (Article 14.4.7), Oman (Article 15.4.7), Peru (Article
16.7.4), Panama (Article 15.5.7), Colombia (Article 16.7.4), Korea (Article 18.4.7)
ISP Liability Not discussed ISPs are provided with limited liability in certain situations of copyright infringement on their servers if
NAFTA (no mention), Jordan (no mention) they comply with regulations
Chile (Article 17.11.23), Singapore (Article 16.9.22), Australia (Article 17.11.29), Morocco, CAFTA-DR (Article
15.11.27), Bahrain, Oman (Article 15.10.29), Peru (Article 16.11.29), Panama (Article 15.11.27), Colombia
(Article 16.11.29), Korea (Article 18.10.30)
Note: When there is no mention of an issue in an FTA, the TRIPS standard generally holds.
Section 301 of the Trade Act of 1974 (P.L. 93-618), as amended, is the principle 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 th
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 United States person that rely upon 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.
Within 30 days of submitting the annual National Trade Estimates of Foreign Trade Barriers
report, the USTR must determine which of the identified countries are “Priority Foreign
Countries.” Countries that “have 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” and “have the greatest adverse impact (actual or
potential) on the relevant United States products” may be identified as “Priority Foreign
Countries.” These countries may be investigated under section 301 provisions of the Trade Act of
1974. The USTR cannot identify countries as Priority Foreign Countries if they have entered into
good faith negotiations or have made significant progress in improving their intellectual property 56
If a country is named as a “Priority Foreign Country,” the USTR must launch an investigation
into that country’s IPR practices. This investigation is conducted in a manner similar to a “Section
301” investigation; the USTR must determine a course of action within six months (9 months if a
determination of complex circumstances is made). 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 that is the subject of the action to be taken. Since
the advent of the WTO and its recourse to dispute settlement, the use of the first option may lead
to the initiation of dispute settlement proceedings at the WTO for member countries, rather than
unilateral retaliation. For countries outside the WTO, the possibility of trade sanctions remain.
The USTR also has created several administrative categories for country identification in the
Special 301 Report. “Priority Watch List” countries are those whose acts, policies, and practices
warrant concern, but do not meet all of the criteria for identification as a 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. “Watch List”
56 For the Special 301 provisions, see 19 U.S.C. §2242; Trade Act of 1974, as amended, (P.L. 93-618), §182.
countries have intellectual property protection inadequacies that are less severe than those on the
Priority Watch List, but still attract U.S. attention. Just being on one of the Special 301 lists may
induce countries to improve their IPR protection. Finally, countries identified for “Section 306”
are monitored for compliance with bilateral intellectual property agreements used to resolve
investigations under Section 301. Additionally, the USTR launches out-of-cycle reviews on
countries to monitor their progress on intellectual property issues. Out-of-cycle reviews are
conducted on countries that USTR considers to require further review and may result in status
changes for the following year’s Special 301 report.
Special 301 Report for 2008
For its 2008 Special 301 Report, the USTR reviewed the IPR policies and practices of 78 countries. The report states
that, despite some improvements, China and Russia remain top concerns for the Administration due to their
inadequate IPR protection and enforcement.
China and Russia, along with seven other countries (Argentina, Chile, India, Israel, Pakistan, Thailand, and Venezuela)
were placed on the Priority Watch List for 2008. The USTR placed another 36 countries on its Watch List. No
countries were designated as Priority Foreign Countries. The 2008 Special 301 Report also noted progress made by
trading partners. Egypt, Lebanon, Turkey, and Ukraine were downgraded from the Priority Watch List to the Watch
List, while Belize and Lithuania were removed from the Special 301 listings completely for 2008. In the previous year,
the USTR downgraded Brazil from the Priority Watch List to the Watch List, where it remains, and removed the
Bahamas, Bulgaria, Croatia, the European Union, and Latvia from the Special 301 listings altogether.
China and Paraguay both continue to be subject to section 306 monitoring. In addition, in the 2008 report, the USTR
announced out-of-cycle reviews for Taiwan and Israel. In the 2007 report, the USTR declared out-of-cycle reviews for
Russia, Brazil, the Czech Republic, and Pakistan.a
a. The USTR Special 301 Report 2008 is available on the USTR website, http://www.ustr.gov
Identification of countries for the “Special 301” lists is a lengthy process of information gathering
and analysis based on the USTR’s annual trade barriers report and consultations with a wide
variety of sources, including government agencies, industry groups, other private sector
representatives, Congressional leaders, and foreign governments. The Special 301 statute is the
overall guideline for identifying countries for the various lists. However, placements are country-
specific and, according to a USTR official, take into consideration a host of factors, several of 57
which are mentioned in the Special 301 report. These include the level and scope of the
country’s IPR infringement and their impact on the U.S. economy. Other considerations include
the strength of the country’s IPR laws and enforcement of IPR laws. The USTR also evaluates
progress made by the country in improving IPR protection and enforcement in the past year.
However, even significant progress oftentimes does not change the position or inclusion of a
country on the lists. For instance, the USTR may decide not to upgrade a country from the
Priority Watch List to the Watch List so that it can continue monitoring the country’s intellectual
property practices. Also, the USTR may note significant progress made by a country but not
remove the country from the Special 301 list in order to continue highlighting concerns about the
country’s practices and limit backsliding. Another consideration for the USTR is the sincerity of
the country’s commitment to multilateral and bilateral trade agreements. There is no weighting
criteria for the factors or a formula 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.
57 Conversation with USTR official, July 2006.
Some observers speculate that the Special 301 rankings are subject to external influences. The
lack of a specific framework for placing countries, aside from the general directives from the
Special 301 statute, has raised concerns that foreign policy considerations affect the process. For
example, an IIPA representative suggested that USTR placement of countries is influenced by 58
geopolitical reasons. This source cites Russia as an example of a country with high IPR
infringement that could be named as a Priority Foreign Country but is not due to unrelated foreign
policy considerations. Other observers of U.S. trade policy suggest that pharmaceutical
companies have a stronghold on policy direction. Oxfam International, a confederation of
poverty-alleviation organizations, contends that the U.S. government’s policy on patents “is still 59
largely influenced by the narrow commercial interests of the giant pharmaceutical companies.”
A USTR official stated that the interests of pharmaceutical companies do not override concerns
by other interest groups in evaluating country placement for the Special 301 report. The official 60
emphasized that all industry group submissions are given fair and due consideration.
Section 337 of the Tariff Act of 1930 (19 U.S.C. 1337), as amended, 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, or protected
design rights. While the statute has been utilized to counter imports of products judged to be
produced by unfair competition, monopolistic, or anti-competitive practices, it has become
increasingly used for its IPR enforcement functions in recent years. 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 exists or is in the process of being established. However, unlike other trade
remedies such as antidumping or countervailing duty actions, no showing of injury due to the
import is required.
The U.S. International Trade Commission (ITC) administers Section 337 proceedings. USITC
must investigate complaints either brought to it or ones commenced under its own initiative. An
administrative law judge (ALJ) provides an initial determination (ID) to the ITC which can accept
the ID 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. The ITC may issue either a
limited or general exclusion order enforced by U.S. Customs. A general exclusion order directs
U.S. Customs to keep out all infringing articles regardless of the source. More commonly, a
limited exclusion order is employed to exclude infringing articles from the firm subject to the
ITC’s investigation. Alternatively, the ITC may enforce a cease and desist order to stop the sale of
the infringing product in the United States. However, 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 period for “policy reasons,” which has been interpreted to mean national security 61
58 Telephone conversation with PhRMA representative, July 2006.
59 Oxfam International, “US bullying on drug patents: One year after Doha,” Oxfam Briefing Paper 33,
60 Telephone conversation with USTR official, July 2006.
61 For more information on the Section 337 investigation and enforcement process, see CRS Report RS22880,
Intellectual Property Rights Protection and Enforcement: Section 337 of the Tariff Act of 1930, by Shayerah Ilias.
During 2006, the ITC reported the initiation of 38 new and ancillary 337 investigations. Of these,
34 concerned patent infringement and 4 were allegations of trademark infringement. The ITC
completed a total of 28 investigations and ancillary proceedings under section 337 in 2006, which
resulted in 7 exclusion orders and one cease-and-desist order. According to the ITC, Section 337
cases increasingly involve advanced technologies in the computer, telecommunications, 62
automotive, and pharmaceutical sectors.
The Generalized System of Preferences (GSP) is a program that provides preferential duty-free
entry to certain products from designated developing countries. The purpose of the program is to
foster economic growth in developing countries by increasing their export markets. The Trade Act
of 1974 authorized the GSP for a ten-year time frame, and the program has been renewed from 63
time to time. Most recently, in 2006, Congress extended GSP through 2008. The GSP program 64
currently offers preferential access for about 5,000 products from 132 countries and territories.
Although the GSP is non-reciprocal, 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 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, 65
including the country’s provision of IPR protection.
The GSP program undergoes an annual review by the GSP Subcommittee of the 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. The USTR currently is reviewing a petition by the IIPA
to remove Brazil from GSP benefits because of its alleged insufficient IPR protection. In 2006,
the USTR concluded a review of Pakistan’s IPR policies and practices in response to a petition
also by IIPA for copyright evaluations. The review found that Pakistan has taken steps to reduce 66
IPR optical disc piracy. Consequently, Pakistan remains a GSP beneficiary. For 2007, the USTR
is scheduled to continue evaluating IPR protection in Russia, Lebanon, and Uzbekistan on the 67
basis of IIPA petitions for ongoing GSP reviews.
The United States has a complex apparatus for supporting intellectual property rights, with
responsibilities cutting across many different federal government agencies. Protection activities
include developing IPR policy, informing and advising Congress about IPR-related issues,
participating in international trade negotiations to promote IPR, and providing IPR training and
technical assistance in other countries. Enforcement activities involve the conduct of criminal
62 “The Year in Trade 2006,” USITC Publication #3927, July 2007, pp. 2-12.
63 For a more thorough discussion of GSP, see CRS Report RL33663, Generalized System of Preferences: Background
and Renewal Debate, by Vivian C. Jones.
64 USTR, “U.S. Generalized System of Preferences Guidebook,” February 2007.
65 91 USC 2462(b)(2)
66 USTR, “USTR Ends Review of Pakistan’s Protection of Intellectual Property Rights,” January 24, 2006.
67 USTR, “GSP 2007 Annual Review Lists.”
investigations in the United States and abroad, interdiction of pirated and counterfeit goods, and
monitoring of compliance with trade agreements. Enforcement also involves capacity-building
activities to foster stronger IPR law enforcement in other countries.
It is difficult to obtain a complete picture of the magnitude of federal budget devoted to
intellectual property laws. Some of these agencies perform their IPR related activities within
existing budget parameters, and do not differentiate specific sums devoted to IPR-related
activities. Based on a review of agency funding by Congress, it appears that the U.S. government
provided at least $1.92 billion for IPR protection and enforcement for FY2008, a slight increase
from at least $1.81 billion for FY2007 (see Table 7). The total is likely to be higher since the
amount of funding devoted toward IPR activities was not determined for all agencies. What
follows is a discussion of the various IPR functions of U.S. agencies.
Two agencies within the Department of Commerce, the Patent and Trademark Office (PTO) and
the International Trade Administration (ITA) address IPR issues. Additionally, the National
Intellectual Property Law Enforcement Coordinating Council (NIPLECC), an interagency 68
coordinating body, is housed within Commerce.
The PTO administers the U.S. laws pertaining to patents and trademarks. The agency processes
patent and trademark applications, issues patents and registers trademarks, and circulates patent
and trademark information. 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 69
capacity building programs to assist in promoting strong IPR regimes in foreign countries. 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 U.S. 70
International Trade Commission’s Section 337 proceedings (discussed above). The PTO is fully
funded through fees generated from patent and trademark applications. For FY2007, the Revised
Continuing Appropriations Resolution (P.L. 110-5) provided the PTO with budgetary authority to
spend $1.8 billion. The Consolidated Appropriations Act for FY2008 (P.L. 110-161) provided the
PTO with budgetary authority to spend $1.9 billion. According to the PTO Congressional Liaison,
funding for efforts such as the Strategy Targeting Organized Piracy (STOP), NIPLECC activities,
and IPR technical and training programs comes from this account.
The ITA administers many of the international trade programs of the Department of Commerce,
include aspects involving IPR. The ITA monitors foreign countries’ progress in implementing
intellectual property agreements; reviews Generalized System of Preferences (GSP) petitions
68 General information about the Department of Commerce is available at http://www.doc.gov.
69 NIPLECC, “Report to the President and Congress on Coordination of Intellectual Property Enforcement and
Protection,” September 2006, pp. 47-49.
70 Conversation with PTO official, November 26, 2007.
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 with U.S. businesses and industry 71
groups to make sure that IPR-related trade concerns are addressed. Based on the Revised
Continuing Appropriations Resolution for 2007 (P.L. 110-5), ITA funding was enacted at $395.6
million, identical to the agency’s 2006 budget. IPR funding is not distinguished in the budget, but 72
an ITA official estimated that FY2007 spending on IPR specifically was $9.6 million. For
FY2008, P.L. 110-161 provides ITA with $413.2 million in enacted funds (including both direct
appropriation and anticipated receipts from fees).
The DOJ enforces criminal laws that protect IPR in the United States and internationally through
the prosecution of intellectual property cases. The Civil Division’s Office of Consumer Litigation
specializes in intellectual property cases involving public health and safety. The Federal Bureau
of Investigation (FBI) has an intellectual property enforcement program focusing on those
intellectual property crimes that have the most bearing on national and economic security, such as 73
trade secret theft, Internet piracy, and counterfeit good trafficking. 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. The FY2007 SSJC Conference Report (H.Rept. 109-520) provided DOJ with $2.2
million for intellectual property investigations and prosecution. The FY2008 Senate CJS
Conference Report (S.Rept. 110-124) substantially increased IPR funding, providing $13.1
million for domestic and international intellectual property investigations and prosecution, as well
as the creation of a FBI operational unit dedicated wholly to working with the DOJ’s Computer
Crime and Intellectual Property Section on criminal intellectual property cases.
The DHS, through its Customs and Border Protection (CPB) unit and Immigration and Customs
Enforcement (ICE) unit, conducts intellectual property rights enforcement activities. Neither DHS
unit has a line item for IPR enforcement. The ICE and the FBI jointly run the National
Intellectual Property Rights Coordination Center that coordinates U.S. Government domestic and 74
international law enforcement activities.
Taking the lead in day-to-day IPR enforcement activities at the U.S. border, the CBP is
responsible for detecting and seizing counterfeit and pirated goods entering the United States and 75
determining penalties for infringement. CBP has the authority to determine whether or not
71 NIPLECC, “Report to the President and Congress on Coordination of Intellectual Property Enforcement and
Protection,” September 2006, pp. 67-69.
72 Conversation with ITA official, October 17, 2007.
73 Department of Justice, “Progress Report of the Department of Justice’s Task Force on Intellectual Property,” June
2006, http://www.usdoj.gov/opa/documents/ipreport61906.pdf, pp. 17-24.
74 Information about the DHS is available at http://www.dhs.gov.
75 Certain customs-related IPR policy-making resides within in the Treasury.
imports infringe federally registered trademarks and copyrights and to detain or seize such
infringing goods. Owners of copyrights and trademarks are able to record information about their
rights in the CBP’s electronic IPR database. As noted earlier, in contrast to trademarks and
copyrights, CBP does not have the jurisdiction to make determinations about patent
infringements. However, it is able to block imports determined by the ITC to infringe a U.S. 76
patent by a Section 337 investigation (see above). H.Rept. 109-476 noted the gravity of the IPR
infringement problem and requested CBP to provide information on the resources devoted to
preventing IPR infringement for 2004-2007 (projected).
ICE is charged with investigating 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 activities that is relevant to identifying and apprehending counterfeit 77
shipments is provided to CBP.
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 for preventing counterfeits from entering the 78
United States is part of overall FDA import safety efforts.
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 copyright-
related 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 79
crafting their own copyright laws. For FY2007, the Copyright Office was provided $22.7
76 NIPLECC, “Report to the President and Congress on Coordination of Intellectual Property Enforcement and
Protection,” September 2006, pp. 143-145. Additional information about CBP is available at http://www.cbp.gov.
77 Ibid. Also refer to the ICE website, http://www.ice.gov.
78 Conversation with FDA official, November 26, 2007. Additional information is available on the FDA website,
79 NIPLECC, “Report to the President and Congress on Coordination of Intellectual Property Enforcement and
Protection,” September 2006, pp. 97-98. Also see Copyright Office website, http://www.copyright.gov/.
million (not including authority to spend receipts) (P.L. 110-5). The FY2008 Consolidated
Appropriations Act provides the Copyright Office with $5.3 million in new budgetary authority
(not including authority to spend $44.2 million in receipts).
Copyright Office appropriations also specify funding for IPR-related activities in developing
countries. The FY2007 Legislative Branch Appropriations Act (H.R. 5521) provided that not
more than $100,000 be available for the International Copyright Institute in the Copyright Office
of the Library of Congress to train nationals of developing countries in intellectual property laws
and policies. For FY2008, the Consolidated Appropriations Act (P.L. 110-161) also provided
$100,000 for the International Copyright Institute for such activities.
State represents U.S. views in both bilateral and multilateral arenas. State works to build
international consensus for intellectual property rights enforcement. Information from State’s
foreign postings informs the USTR Special 301 review. In particular, the Bureau of International
Narcotics Control and Law Enforcement (INCLE) works to combat intellectual property piracy,
while the Bureau of Energy, Economics and Business Affairs supports stronger international IPR 80
standards to fight global piracy and counterfeiting. While the FY2007 SSJC Conference Report
(H.Rept. 109-520) did not dedicate any funding for IPR enforcement, it called for embassies in
major U.S. markets, such as China, Russia, and Brazil, to develop surveys to measure levels of
piracy and counterfeiting and to increase dialogue with officials in Chinese provinces to
encourage implementation of China’s IPR obligations. The FY2007 Foreign Operations
Conference Report (H.Rept. 109-486) recommended $5 million for programs to fight intellectual
property piracy under the INCLE Account. The Consolidated Appropriations Act for 2008 (P.L.
110-161) provides $5 million from the INCLE Account for combating piracy (Section 688). The
act notes that the funds should be used in countries that are not members of the Organization for
Economic Cooperation and Development (OECD) and specifies some of the activities for which
the funds may be used, including providing equipment and training for law enforcement; training
judges and prosecutors; and providing assistance in complying with international IPR treaties and
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. According to the AID Trade Capacity Building (TCB)
database, AID projects for TCB for compliance with the TRIPS Agreement totaled $2.1 million in 81
80 NIPLECC, “Report to the President and Congress on Coordination of Intellectual Property Enforcement and
Protection,” September 2006, pp. 81-84. Additional information about the State Department is available at
81 Trade Capacity Database and general AID information is accessible at http://www.usaid.gov.
The USTR is the lead trade agency of the United States government. Through its annual Special
301 report, USTR is charged with monitoring the adequacy and effectiveness of IPR protection of
our trading partners as well as their compliance with bilateral and multilateral trade agreements,
to identify countries not in compliance with such agreements, and to negotiate with those
countries better compliance. USTR also advances greater protection and enforcement of IPR in its
negotiations of U.S. free trade agreements. Additionally, USTR works to implement the
Administration’s STOP! Initiative, which draws together the major federal government agencies,
private sector groups, and trading partners to take targeted action in fighting piracy and 82
The FY2007 funding level for USTR was $44.2 million, provided under the Revised Continuing
Appropriations Resolution (P.L. 110-5). The FY2008 funding level for USTR was $44.1 million,
under the Consolidated Appropriations Act (P.L. 110-161). In the House SSJC Committee Report
(H.Rept. 110-240), the USTR was provided with $48.4 million for FY2008, $4 million more than
requested, to reflect increased USTR focus on international IPR protection and enforcement,
among other activities. USTR does not differentiate sums for its various negotiating activities,
and Congress has not designated specific funds to IPR activities within USTR.
The ITC is a quasi-judicial federal government agency responsible for investigating and
arbitrating complaints of unfair trade practices. The ITC adjudicates allegations of imported
products that infringe U.S. patents, trademarks, and copyrights through its Section 337
proceedings (see above). 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; rights-holders seeking damages must file action with the 83
U.S. federal district court. For FY2008, ITC was provided with $68.4 million in P.L. 110-161.
Created by Congress in 1999, NIPLECC coordinates U.S. activities to protect and enforce IPR
domestically and abroad. NIPLECC draws together major federal agencies that help to enforce
IPR. Members include USTR Commerce, DHS, DOJ, and State, as well as and their subagencies.
The Copyright Office participates in the Council in an advisory role. The U.S. Coordinator for
International Intellectual Property Enforcement heads NIPLECC’s interagency coordination 84
efforts. In the SSJC Conference Report (H.Rept. 109-520) for FY2007, NIPLECC is provided
with $900,000 in dedicated funding under the Department of Commerce heading. For FY2008,
P.L. 110-161 allows for $1 million to be transferred from the PTO for activities associated with
82 NIPLECC, “Report to the President and Congress on Coordination of Intellectual Property Enforcement and
Protection,” September 2006, pp. 91-96. Also see USTR website, http://www.ustr.gov.
83 United States International Trade Commission website, http://www.usitcs.gov.
84 NIPLECC, “Report to the President and Congress on Coordination of Intellectual Property Enforcement and
Protection,” September 2006, pp. 12-15
NIPLECC. In addition, the House SSJC Committee Report (H.Rept. 110-240) called for the FBI
to increase the number of agents dedicated to IPR infringement investigations in NIPLECC. In
October 2008, the authorities creating NIPLECC were repealed by the “Prioritizing Resources
and Organization for Intellectual Property Act of 2008” (P.L. 110-403), which created an
Intellectual Property Enforcement Coordinator located in the Executive Office of the President
(see section “Effectiveness of the U.S. IPR Organizational Structure,” below).
In 2006, NIPLECC adopted the Administration’s STOP! as its plan of action for protecting
intellectual property rights abroad. The Administration established STOP! in 2004 to crack down
on criminal networks in pirated and counterfeit goods trafficking. This initiative expresses the
Administration’s commitment to intellectual property protection and enforcement. STOP! is
similar to NIPLECC in that it is a coordinating structure to enhance U.S. IPR protection and
enforcement and works with many of the same agencies as NIPLECC, such as Commerce, DOJ, 85
DHS, State, and USTR. The FDA is not a part of NIPLECC, but is a participant in STOP!. The 86
budget for STOP! comes from Department of Commerce funding. The FY2007 SSJC
Conference Report (H.Rept. 109-520) expressed support for the STOP! initiative, but did not
specify any funding for initiative.
Table 7. FY2007 IPR Protection and Enforcement Dedicated Funding for U.S.
Government FY2008 FY2008 FY2007
Agency Dedicated Activities Dedicated
PTO $1.9 billion Administering patent and trademark applications; policy $1.8 billion
guidance; training and technical assistance
NIPLECC $1 million Interagency IPR enforcement coordination $900,000
Department of $13.1 million Intellectual property investigations and prosecutions; $2.2 million
Justice NIPLECC support
Copyright Office $100,000 International Copyright Institute activities $100,000
Department of $5 million Combat intellectual property piracy under International $5 million
State Narcotics Control and Law Enforcement Account
USAID $2.9 million (for Trade capacity building for TRIPS and IPR compliance $2.1 million (for
Total $1.92 billion U.S. government IPR activities $1.81 billion
Note: While all of PTO’s activities are dedicated toward IPR support, it is difficult to determine exactly how much is
directed toward international IPR promotion efforts.
85 Office of the U.S. IPR Coordinator, “Strategy for Targeting Organized Piracy: Accomplishments and
Achievements,” September 2007.
86 GAO-07-710T, Intellectual Property: National Enforcement Strategy Needs Stronger Leadership and More
Accountability, p. 6.
Since the inclusion of IPR provisions in the TRIPS Agreement, there has been an ongoing debate
about the appropriateness of including IPR as a component of U.S. trade policy. Some argue that
IPR, which grant legal temporary monopolies to rights-holders for their creations, are actually
barriers to trade and have no place in trade liberalization negotiations. Others contend that IPR
promote trade through innovation, economic growth, and technology transfer from advanced to
In addition to this broader discussion about the role of IPR in trade policy, concerns have been
voiced about the trade policy channels used by the United States to promote international IPR
protection and enforcement. The Bush Administration has pursued strengthened international IPR
through multilateral, regional, and bilateral venues. However, some question the appropriateness
of using regional and bilateral FTAs for this purpose, contending that such actions take away
from the effectiveness of multilateral IPR promotion efforts. Periodically, members of Congress
have expressed concern over U.S attempts to expand the IPR obligations of foreign countries
through trade agreements. In 2002, the TPA legislation was amended to state that the United
States recognized the Doha Declaration on the TRIPS Agreement and Public Health in the context th
of negotiating FTAs. In the 110 Congress, Congressional Democrats and the Administration
agreed to modifications of the patent provisions in the Peru FTA as a result of the May 2007
bipartisan trade agreement. Still, a new Government Accountability Office (GAO) report suggests
that USTR should offer clearer policy guidance to align FTA negotiating activities with the WTO 87
Doha Declaration. Additionally, there is concern by some that the ratchet of IPR commitments
pursued through regional and bilateral FTAs may be too stringent for developing countries and
may limit innovation and creativity by stifling the exchange of ideas.
Further expansion of IPR provisions may be affected by the language of any future TPA. In
discussions about renewal of TPA, Congress may choose to consider possible reiteration or
expansion on its IPR goals related to global health from the 2002 TPA. At issue for Congress is
whether or not to follow the template provided by the Peru, Panama, and Colombia FTAs in
future trade negotiations.
Without renewal of the TPA, the Administration may be prompted to seek stronger IPR through
plurilateral venues. In October 2007, the United States and several key foreign trading partners
(Australia, Canada, the 27 member states of the European Union, Japan, Mexico, Morocco, New
Zealand, Singapore, South Korea, Switzerland) announced their intention to begin negotiating an
Anti-Counterfeiting Trade Agreement (ACTA). The countries have pledged to go beyond the
TRIPS Agreement by promoting international cooperation, developing “best practices” for 88
enforcement, and establishing a strong legal framework for enforcement. ACTA would provide 89
IPR enforcement tools where the TRIPS Agreement and other international treaties fall short.
87 GAO-07-1198, U.S. Trade Policy Guidance on WTO Declaration on Access to Medicines May Need Clarification,
88 USTR Factsheet, “Anti-Counterfeiting Trade Agreement,” August 4, 2008.
89 Liza Porteus Viana, “USTR Plans Another Year of Elevating IP Protection With Trading Partners,” Intellectual
Property Watch, April 4, 2008.
Copyright-based businesses and anti-piracy advocates voice strong support for the ACTA.
However, some observers have been concerned with the extent to which U.S. ‘fair use’ practices
would be maintained under an agreement. Other parties have expressed concern with what they
consider the secrecy with which ACTA is being negotiated. On September 17, 2008, numerous
consumer groups led by the Electronic Frontier Foundation sued USTR under the Freedom Of
Information Act to obtain the negotiating text of the agreement. USTR has responded that
negotiations are still at the conceptual phase, and that ‘understandings of confidentiality’ are 90
routine in negotiating trade agreements. Nonetheless, certain issues have been discussed as
potential components of an agreement, including:
• the role of internet service providers (ISP) in enforcing IPR laws online and the
potential liability of ISPs for infringements over their networks.
• the ability of customs officials to enforce IPR laws at the border through seizure
of infringing products without being prompted by the rights-holder.
• the scope of criminal penalties for ‘willful’ violations of ‘commercial scale’
trademark and copyright infringement, including mandatory imprisonment, 91
monetary fines, and the seizure and destruction of infringing goods.
There are concerns on the part of some lawmakers about whether or not the present U.S. IPR
organizational structure is doing enough to enforce foreign countries’ IPR obligations, as well as
concerns about whether or not the structure is capable of doing more.
Some members of Congress have criticized the U.S. organizational response to international IPR
protection and enforcement, particularly that of the National Intellectual Property Law
Enforcement Coordinating Council (NIPLECC). Recent GAO testimony points out some of the
problems associated with NIPLECC, including an absence of mission, dearth of activities, and 92
poor image among businesses. The FY2007 CJS Committee Report (S.Rept. 109-280)
expressed concern about the lack of information on NIPLECC’s progress and evidence of
In the 110th Congress, several bills were introduced to repeal and replace NIPLECC. The
“Prioritizing Resources and Organization for Intellectual Property Act of 2008” (P.L. 110-403) (S.
3325, Leahy) was signed by President Bush on October 13, 2008. The act, among other
provisions, replaces NIPLECC with an Intellectual Property Enforcement Coordinator (IPEC).
The IPEC, located in the Executive Office of the President and subject to Senate confirmation, is
charged with coordinating U.S. government agency IPR enforcement actions and with providing
assistance to the USTR in conducting trade negotiations relating to IPR enforcement abroad. The
IPEC will also oversee an intellectual property enforcement advisory committee composed of
representatives from the Office of Management and Budget, the Departments of Justice,
Commerce, State, Homeland Security, Agriculture, the Food and Drug Administration, the
90 “USTR Official Cites Confidentiality ‘Understandings’ in ACTA Negotiations,” International Trade Reporter,
September 25, 2008.
91 “U.S. Seeks Police Powers, Stiffer IPR Penalties at ACTA Meeting in Tokyo,” Inside U.S. Trade, October 17, 2008.
92 GAO-07-710T, National Enforcement Strategy Needs Stronger Leadership and More Accountability, April 12, 2007,
at http://www.gao.gov/new.items/d07710t.pdf, pp. 8-10.
Agency for International Development, and the Register of Copyrights. This committee will assist
the IPEC in the development of a joint strategic plan to combat counterfeiting and infringement.
In contrast to NIPLECC, GAO interviews with agency officials suggest that STOP! is viewed
positively for its role in enhancing IPR enforcement as a priority among federal agencies, the
private sector, and internationally. As a presidential initiative, STOP! does not derive from
statutory authority. According to the GAO, STOP! does not fully meet the characteristics
associated with being an “effective national strategy.” GAO has expressed concern that STOP!
does not discuss risk management or the costs, investments, and processes needed to balance the 93
threats associated with counterfeit products with the resources that are available. In testimony
before the Senate Banking, Housing, and Urban Affairs Committee, foreign policy observer
Moises Naim stated that governments must be selective in setting their priorities, adding, “It is
unrealistic to expect governments to combat every aspect of counterfeiting... This approach will 94
further burden already over-stretched governments and greatly reduce their effectiveness.” One
question inferred from the foregoing is whether the United States can or should devote equal
resources to prevent the importation of fake Gucci bags and counterfeit medicines.
While protection and enforcement of IPR is a stated priority for the United States, it is difficult to
get a sense of the magnitude of funding and resources devoted toward IPR support, as there is no
one line item in the federal budget for IPR protection. Our analysis suggests that the United States
spent at least $1.9 billion to support IPR in FY2008. The proposed budget for FY2009 by the
President suggests that intellectual property enforcement is a top priority. The President’s funding 95
requests for FY2008 for IPR-related agencies were greater than for FY2008. Additionally, there
is limited information on the economic and other impacts of piracy and counterfeiting on the
United States. For example, in its Special 301 Report, USTR uses industry figures that are not
independently confirmed. This complicates the ability of lawmakers to weigh the threat of IPR
infringement against the federal resources available for IPR and other government priorities.
Shayerah Ilias Ian F. Fergusson
Analyst in International Trade and Finance Specialist in International Trade and Finance
firstname.lastname@example.org, 7-9253 email@example.com, 7-4997
93 Ibid., p. 11.
94 Testimony before the Security and International Trade and Finance Subcommittee of the U.S. Senate Committee on
Banking, Housing, and Urban Affairs. “Pirating the American Dream: Intellectual Property Theft’s Impact on
America’s Place in the Global Economy and Strategies for Improving Enforcement,” by Moises Naim, April 12, 2007.
95 Liza Porteus Viana, “US Fiscal 2009 Proposed Budget Shows IP Enforcement a Priority,” Intellectual Property
Watch, February 6, 2008.