Intellectual Property and Free Trade Agreements

Overview
The TRIPS Agreement obligated each WTO member state to provide stated levels of intellectual property protection. Although commentators broadly agree that the TRIPS Agreement was a watershed event for international intellectual provision,86 many of its obligations nonetheless fell short of the level of intellectual property rights available in the United States.

For example, U.S. copyright law provides for a term of protection of the life of the author plus 70 years,87 while a term of life plus 50 years is acceptable under the TRIPS Agreement.88 U.S. patent law allows patent term to be extended in order to account for long delays in Patent Office acquisition procedures,89 but the TRIPS Agreement does not require such a measure.

The TRIPS Agreement allows WTO member states to disallow the registration of trademarks that are not visually perceivable90 &mdash; an option that blocks protection for such commercial symbols as sounds and scents &mdash; but no such blanket restriction exists under U.S. law.

In enacting the Bipartisan Trade Promotion Act of 2002, Congress stated that an overall negotiating objective of such agreements was to encourage our treaty partners to agree to “a standard of [intellectual property] protection similar to that found in United States law.”91 In keeping with this mandate, the United States has entered into numerous FTAs that have required their signatories to provide higher levels of intellectual property protection than are required under the TRIPS Agreement.92 With respect to the intellectual property laws, each of the FTAs stipulates standards that comply with current U.S. law. As a result, the United States need take no action in order to comply with those provisions of the FTA. In contrast, the U.S. treaty partner must often substantially amend its intellectual property laws in order to comply with the FTA.93

This article next offers an overview of these FTA “TRIPS-plus”94 intellectual property obligations. It should be noted that the intellectual property provisions of most of these agreements are lengthy and detailed. Further, some of the FTAs impose more significant obligations than others.95 As a result, if particular information about an individual FTA is needed, that instrument should be consulted for a more detailed understanding of its contents.96

Copyrights
Several of the FTAs oblige their signatories to provide a copyright term equal to the life of the author plus 70 years, twenty years longer than the standard set by the TRIPS Agreement. Certain FTAs also include obligations that track those established domestically by the Digital Millennium Copyright Act (DMCA) of 1998.97 In particular, FTA signatories agree to outlaw the circumvention of a technological copyright-control measure, subject to certain exceptions.

Descrambling a scrambled work, decrypting an encrypted work, and bypassing a technological measure without the authority of the copyright owner are among the activities that would violate the DMCA. In addition, the FTAs also commonly require their signatories to prohibit the removal or alteration of “rights management information,” which is in turn defined to mean electronic information that identifies a protected work and its author, as well as the terms and conditions of the use of the work.

Patents
Several FTAs require their signatories to provide a one-year “grace period” to patent applicants. Under these provisions, individuals are granted one year from the date they publicly disclose their inventions to decide whether to file a patent application or not.98 FTAs also commonly require their signatories to accede to the Patent Cooperation Treaty,99 an international agreement that expedites multinational patent acquisition procedures.100

Certain of the FTAs also call for patent term extension based upon administrative delays. The TRIPS Agreement obligates all WTO members to provide a patent term of twenty years from the date of filing.101 However, patent applicants obtain no enforceable rights until such time as the patent actually issues. As a result, extensive Patent Office delays could substantially diminish the period of time in which the patent proprietor enjoys enforceable patent rights. Certain of the FTAs therefore call for patent term extension in the event of “unreasonable delays in a Party’s issuance of patents. . . .”102 Some FTAs also place additional conditions on the grant of compulsory licenses, beyond the requirements of the TRIPS Agreement. For example the Australia-U.S. FTA provides that a compulsory license may be issued only to remedy an antitrust violation or in cases of public non-commercial use, national emergency, or other circumstances of extreme urgency. In these latter instances, the FTA signatory must limit use of the patented invention to the government or a government-authorized entity and shall provide the patent proprietor with reasonable compensation. Further, the patent proprietor is not required to provide additional undisclosed information or technical know-how that is related to the patented invention.103

Trademarks
A number of the FTAs also pertain to the trademark law. They stipulate that a mark need not be visually perceptible in order to be registered as a mark, thereby allowing sounds and scents to serve as marks.104 The FTAs also stipulate that licenses for trademarks need not be publicly registered to be valid,105 and provide that disputes over Internet domain names should be resolved through recourse to the principles established in the Uniform Domain Name Dispute Resolution Policy.106

Data Protection
Certain FTAs require their signatories to provide five years of marketing exclusivity for pharmaceuticals that utilize new chemical entities. For example, Article 15.10:1(a) of the Dominican Republic-Central America-United States Free Trade Agreement provides:


 * If a Party requires, as a condition of approving the marketing of a new pharmaceutical or agricultural chemical product, the submission of undisclosed data concerning safety or efficacy, the Party shall not permit third persons, without the consent of the person who provided the information, to market a product on the basis of (1) the information, or (2) the approval granted to the person who submitted the information for at least five years for pharmaceutical products and ten years for agricultural chemical products from the date of approval in the Party.107

The term “new product” is generally defined as “one that does not contain a chemical entity that has been previously approved in the territory of the Party.”108

Some of the FTAs additionally require their signatories to allow a three-year term of marketing exclusivity in various circumstances for pharmaceuticals that do not qualify as new products.109 Among them is the Australia-United States Free Trade Agreement, which provides in part:


 * With respect to pharmaceutical products, if a Party requires the submission of: (a) new clinical information (other than information related to bioequivalency) or (b) evidence of prior approval of the product in another territory that requires such new information, which is essential to the approval of a pharmaceutical product, the Party shall not permit third persons not having the consent of the person providing the information to market the same or a similar pharmaceutical product on the basis of the marketing approval granted to a person submitting the information for a period of at least three years from the date of the marketing approval by the Party or the other territory, whichever is later.110

Other Provisions
The FTAs also address other intellectual property rights. For example, the U.S.-Australia FTA requires both signatories to provide certain levels of protection to “encrypted programme-carrying satellite signals.”111 In addition, the FTAs commonly call for minimal standards concerning litigation proceedings, remedies, and other intellectual property enforcement measures that exceed those of the TRIPS Agreement.112 The FTAs also set out detailed procedures for the resolution of disputes over compliance with their provisions.113

Innovation Policy Issues
Observers have acknowledged that the FTAs have been an effective mechanism for advancing U.S. interests in intellectual property on the global stage.114 Concerns have nonetheless arisen about the implications of the FTA intellectual property provisions. This report considers three of these concerns: potential lock-in effects, extent of FTA obligations, and the fairness of using FTAs as a mechanism for international intellectual property reforms.

U.S. Interests in the FTA Intellectual Property Provisions
The United States has for many years pursued a policy of encouraging our trading partners to expand legal protection for intellectual property.115 Decreased levels of intellectual property piracy with respect to computer software, music, motion pictures, and pharmaceuticals may promote a more favorable balance of trade for U.S. industry. As Professor J. Thomas McCarthy, a member of the faculty of the University of San Francisco Law School, clearly stated: “We care because if no intellectual property protection exists regarding technical and entertainment information, then we have little to sell the rest of the world.”116

Enhanced levels of intellectual property protection around the world may also serve other goals of the United States. For example, pharmaceuticals are often sold at higher prices in the United States than in other nations.117 The previous unavailability of patent protection for innovative pharmaceuticals in some foreign jurisdictions is one factor that may have contributed to this price difference. The introduction of patent protection for pharmaceuticals in developing countries will potentially allow innovative drug companies to recover a portion of their R&D expenses in foreign jurisdictions. In turn, because U.S. consumers will no longer be responsible for funding such a large share of the R&D expenditures of innovative FTAs have already resulted in significant patent law reforms for many U.S. trading partners. In addition, by establishing certain multinational intellectual property norms with the assistance of a number of trading partners, the United States may be better able to negotiate on a multilateral basis in the future.121

Potential Lock-In Effects
Although many observers have cited the merits of FTAs with respect to the intellectual property interests of the United States, others have expressed concerns about the effects or implications of these agreements. Some commentators have expressed concern that the FTAs may potentially introduce complications to U.S. law reform efforts, even in circumstances where modifications to domestic intellectual property rules are considered desirable in the future.122 In particular, should the Congress later wish to make changes to its laws that are inconsistent with the terms of the FTAs, the United States would either have to renegotiate these agreements, or face the possibility of violating their terms.

A potential example of this situation involves the importation of patented pharmaceuticals into the United States, a topic that the Singaporean, Australian, and Moroccan FTAs address. For example, Article 15.9, paragraph 4 of the United States &mdash; Morocco FTA provides:


 * Each Party shall provide that the exclusive right of the patent owner to prevent importation of a patented product, or a product that results from patented process, without the consent of the patent owner shall not be limited by the sale or distribution of that product outside its territory. [Footnote 10: A Party may limit application of this paragraph to cases where the patent owner has placed restrictions on importation by contract or other means.]

This provision impacts, among other topics, a practice commonly termed “parallel importation”123 or “reimportation.”124 Parallel imports are authentic products that are legitimately distributed abroad and then sold in the United States, without the permission of the authorized U.S. dealer. These goods are legitimate in that they are produced by the brand-name drug company or its authorized representative. In particular, parallel imports are not generic versions of a brand-name drug distributed by a different manufacturer, nor are they pirated copies that form part of the “black market.” Because parallel imports disrupt the marketingdrug companies on a global basis, the price of medications may decrease in the United States. It is possible, however, that developing country markets may not prove sufficiently profitable such that prices would be reduced for U.S. consumers.118

In comparison with larger multilateral settings, FTAs may provide a more effective mechanism for advancing the intellectual property interests of the United States. USPTO officials have, for example, expressed frustration over slow progress in consultations over a proposed patent law harmonization treaty before the World Intellectual Property Organization (WIPO).119 One USPTO news release stated, for example, that recent events at WIPO raise “serious questions as to whether WIPO is even a viable forum for further meaningful patent discussions.”120 In contrast, the arrangements established by the brand-name drug company, however, they are sometimes called “grey market goods.”125

Under current judicial precedent,126 U.S. patents may be used to block imports of proprietary pharmaceuticals. The fact that the patent proprietor or its representative previously sold the drug outside the United States does not affect this analysis. This rule rejects a principle termed “international exhaustion,” under which a sale of a drug anywhere in the world exhausts the U.S. patent. The FTAs that address this issue therefore comport with governing U.S. judicial opinions. Legislation that had been proposed before the 109th Congress would have altered the current rules concerning the parallel importation of patented pharmaceuticals.

Extent of Obligations
Most of the FTAs that the United States has joined are bilateral, although some current or contemplated FTAs extend to a limited set of trading partners. On its face, it would appear that U.S. obligations undertaken in a particular FTA would extend only to its fellow signatory or signatories. Commitments undertaken in the TRIPS Agreement may extend FTA obligations to a much broader range of U.S. trading partners, however. In particular, every WTO member may in fact be entitled to enjoy the benefits of the commitments made with a particular FTA due to the most-favored-nation obligation imposed by Article 4 of the TRIPS Agreement. That provision stipulates:


 * With regard to the protection of intellectual property, any advantage, favour, privilege or immunity granted by a Member to the nationals of any other country shall be accorded immediately and unconditionally to the nationals of all other Members.

Although Article 4 of the TRIPS Agreement does provide four exceptions to this most-favored-nation obligation, none of these exceptions seems applicable to the FTAs.128 In view of Article 4 of the TRIPS Agreement, some experts believe that a particular FTA may extend U.S. obligations not just to its partner or partners to that agreement, but to all WTO members as well.129 Other commentators differ, however, stating that free trade agreements are exempted from most-favored-nation obligations due to certain provisions of the General Agreement on Tariffs and Trade.130 One possible consequence of the breadth of FTA obligations is that other trading partners may be less willing to make concessions with respect to their intellectual property laws, given that they may already be entitled to the full scope of commitments that the United States made in existing FTAs.