The Trade Subcommittee of the House Ways and Means Committee held a hearing on March 26, 2019, on the topic of Trade and Labor. In his opening remarks, the Subcommittee chairman, Rep. Earl Blumenauer noted, “our serial failure to adequately enforce trade agreements.” Although intellectual property rights (IPR) was not the focal point of the hearing, the general theme of enforcing trade agreements is important in view of the fact that the free trade agreements entered into by the U.S. include IPR chapters.

The congressman’s overall observation about enforcing trade agreement provisions is worth noting because the Office of the U.S. Trade Representative (USTR) is statutorily obligated to issue an annual report by April 30, identifying trading partners whose IPR regimes are detrimental to U.S. business. The report, popularly known as the “Special 301” report, describes the acts, practices and policies in countries that deny U.S. companies the ability to fully benefit from the commercial use of their IPR assets.

USTR has been issuing these annual reports for 30 years. The identification of countries with IPR deficiencies is based upon a combination of private sector experiences abroad and their inputs as well as information collected and provided by U.S. government officials posted around the world.

The annual reports identify the types of IPR deficiencies in foreign markets that may include legislative deficiencies in IPR laws, judicial inadequacies, significant delays in processing patent or trademark applications, high levels of online copyright piracy, ineffective domestic enforcement or border enforcement and various other deficiencies.

U.S. trading partners are obligated to provide various levels of IPR protections as a result of either international agreements or free trade agreements. The annual Special 301 reports may suggest that enforcing the obligations of trading partners to provide adequate and effective IPR protections is problematic. Conceding that incremental progress may be occurring, the Special 301 reports may indicate lingering issues in greater detail.

The past nine Special 301 reports (2010-2018) have listed a total of 48 trading partners having IPR deficiencies. Among those listed, 31 countries, including 14 in the western hemisphere, have been listed in all of the nine reports. This raises questions regarding trading partners and the ability to ensure that trade agreement obligations are effectively implemented.

Looking at the countries that are repeatedly listed, the question must be asked, why? As several of these countries have a free trade agreement with the U.S., are the deficiencies due to a lack of political will to implement the identified IPR deficiency (act, practice, policy) as the U.S. has indicated? Beyond listing the country and identifying the deficiency, what steps should or could the U.S. and the affected IPR owners take to address these issues or areas of concern?

Regarding the IPR provisions of trade agreements and the related Special 301 process, it would seem to be in the interest of countries listed in the Special 301 report and the U.S. to improve the process of working toward resolution of the issues that keep a country on the annual report for decades. Given the length of time some countries are identified in the Special 301 report, there should be a point at which the responsibility falls on the U.S. to engage in a diagnostic examination for the reasons why a particular act, practice or policy is not being corrected so that decisions can be made about the trade relationship.

This post was written by Timothy Trainer, a co-author of Customs Enforcement of Intellectual Property Rights, published by Thomson Reuters.

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