March 29, 1990

March 29, 1990 | Backgrounder on Trade, Economic Freedom

New Threats to Intellectual Property Rights

(Archived document, may contain errors)

761 March 29,1990 NEW THREATS n3.-AL PROPERTYRIGHTS INTRODUCTION A key issue in international trade talks will be how nations should protect intellectual p roperty -patents, copyrights, trademarks, and trade secrets.The so-called Uruguay Round of trade negotiations, named after the 1986 open ing conference held in Puntal del Este, Uruguay, by the General Agreement onTariffs and Trade (GAlT), are underway in Geneva and will end this year.

They may produce an international agreement on protection of intellectual property rights, known by experts as IPRs. Done properly, a GATT negotiated treaty protecting IPFb would boost trade and economic develop ment not only in theThird World, but in the United States and other in dustrialized nations as well.

Protecting intellectual property is essential to technological and industrial innovation and fundamental to economic growth. Guarantees for patents trademark, and copy rights produce incentives for creative thinking. They protect innovators and enterprising companies from the theft of their ideas and provide a financial return for the work that went into formulating and ar ticulating those ideas Aiding Competition. Secu r ing intellectual property rights also helps countries compete economically in the international market. Said Paolo Bifani, a consultant to the United Nations Conference onTrade and Develop ment (UNO in 1989, It is the development, rapid diffusion and mast e ry of technology that enables countries to create comparative advantage and to acquire competitiveness in international markets 1 Paolo Bifani, InteUectual Property Rights and International Trade, in Uncguay Round. Papers on Selected Issues, United Nation s Conference on Trade and Development, UNCTADDP/lO, New York, 1989, p. 132.

Adequate and effective legal mechanisms for protecting such intellectual property as hnovative products, books, computer chip designs, and computer programs are indispensable in fo stering the international trade that develop ing countries need to compete globally Third World Dissent. The general consensus in the West that protecting in tellectual property rights is good economically is not shared by many under developed countries.. T hese countries insist that knowledge and other intellec tual products somehow are the common heritage of mankind, and thus should be shared by all, rather than be subject to laws governing material property.This latter view is accompanied by the strong be lief that govern ment bureaucracies should determine who benefits from the efforts of others.

Explains Gunda Schumann, Director of the Intellectual Property Project at the United Nations Center onTransnational Corporations (CIC In their developing countrie s] opinion, intellectual property rights give innovators a monopoly on information that is used to exact unreasonably high prices for their knowledge and to control the dissemination of knowledge-based products through unwarranted restrictions on its use T his attitude by very many Third World policy makers has led to the many national laws governing patents, copyrights, and trademarks Known as the countrys intellectual property regime, these provide little protection of in tellectual property. These ineffe c tual laws encourage piracy, counterfeiting and the outright theft of ideas. At the same time, these laws discourage trans fers of new ideas toThird World Nations and the nurturing of new ideas in side theThird World U.S. Leadership. The U.S. has been a ch a mpion of improving the interna tional protection of intellectual property. Washington has promoted such mul tilateral negotiations as those associated with GAlT and the World Intellec tual Property Organization WIPO a specialized U.N. agency based in Gene va, which is supposed to enforce minimum standards for intellectual property protection. The U.S. also has sought to improve how other countries laws protect intellectual property through unilateral action based on U.S. trade laws.

Neither of these U.S. ac tions alone will strengthen international protection of intellectual property rights sufficiently. What is needed is a well-coor dinated set of policies involving multilateral negotiations and unilateral ac tions. These policies-must be designed to-correc t widespread inadequacies i3 and poor enforcement of, laws protecting intellectual property rights 2 Gwda Schumann, Economic Development and Intellectual Property Protection in Asia: A Comparative Analysis, Paper presented at the Conference: Protection of I ntellectual Property Rights in Science, Technology and Economic Performance: International Comparisons May 8-9,1989, Washington, D.C p. 6 2 To do this, the U.S. should Seek an agreement on intellectual property in GATS Uruguay Round that will commit membe r countries to introducing high levels of protection for patents, copyrights, trademarks, and trade secrets, and to effec tive measures for enforcing the measures Defend the integrity of existing intellectual property agreements that are Sder atiack fromTh i rd Worldcountries in the U.N; World Intellectual Property Organization WIPO a GAlT agreement on intellectual property that will benefit the U.S. and developing countries alike Provide technical assistance, such as legal expertise and funding to es tablish effective patent offices, to countries willing to adopt tough intellectual property laws End membership in, and financial support for, organizations that promote weak and ineffective intellectual property protection as does the United Nations Conference o n Trade and Development UNO Threaten U.S. sanctions against countries unless they agree to support WHAT IS INTELLECTUAL PROPERTY Ideas, innovative products and processes, new technologies, and other results of human creativity are called intellectual proper t y As with material property like land, governments set the rules for individuals rights to own and benefit from intellectual property. In most nations, there are sets of laws governing intellectual property known as the countrys intellectual property regi me. Most industrial nations inventors and innovators are granted ex clusive rights to their creations for a given period of time during which they can earn a return on the time and money invested in developing their idea.

This is done through the use of su ch mechanisms as copyrights, patents trademarks, and trade secrets Copyright. Copyright laws protect the representation of ideas, namely literary and artistic works, from unauthorized distribution or publication. A copyright automatically exists upon auth o rship of works such as books recordings, and more recently, computer programs. Copyrights are trans ferable and allow the owner to extract a- fee, or- royalty, for reproduction or performance of the copyrighted work. The duration of the protection is typi cally fifty years after the authors death or, in cases where there is no author fifty years after original publication. Copyright protection is based on nation al law, as is all intellectual property protection, and is effective only in the country concer ned.

Several international treaties protect copyrights. The oldest and most prominent is the 1866 Berne Convention for the Protection of Literary and Artistic Works.This treaty is administered by the World Intellectual Property Organization, a specialized agency of the U.N. It is supposed to enforce mini 3 Patents. A patent is a governments legal guarantee that the patented inven tion can be produced, sold, utilized, or imported only with the explicit authorization of the patent holder. Patents are granted for inventions that are 1. newand commercially useful.The-patent usually lasts .fifteen to twenty years.

International patent protection is provided by the Paris Convention for the Protection of Industrial Property, signed March 20,18

83. Some 99 nations are party to the Paris Convention; it too is administered byWIp0 Trademarks. Trademarks are any sign, word, design, letter, number, color or shape that distinguishes one product from another. The shape of a Coca Cola bottle as well as the name, is a trad e mark. Trademarks are registered in BENEFITS FROM PROTECTING INTELLECTUAL PROPERTY For developing countries, improved mechanisms and enforcement of intel lectual property rights will promote innovative economic and business ac tivity, increase direct forei g n investment, accelerate technical transfers from developed countries, and generally advance the countrys technological and industrial development. Many underdeveloped countries refuse to recognize that inadequate intellectual property protection limits t h eir ability to obtain these benefits. Rather than having to bow to American pressure to improve their national laws protecting hteiiectual property -developing countries should be doing so themselves The benefits to theThird World from increased innovativ e capacity and the commensurate output are potentially enormous. Strong, effective patent protection boosts greatly the incentive for individuals and firms to create and 3 VIS. Chamber of Commerce Intellectual PropertyTask Force, Guidelines for Standards f o r the Protection and Enforcement of Trade Secrets, Washington, D.C March 11,1987 4 produce goods and services. Direct benefits include new jobs and new skills in the innovative firms. Government protection of intellectual property also increases the flow o f foreign investment, including that for new research and development facilities and manufacturing plants Positive Influence. The innovative firm brings toThird World countries much more than its products and services. Explains Michael Hodin, a Vice Presi d ent-of the-multinational. pharmaceutical company Pfizer International hc in the process of transferring the complete set of services and knowledge accompanying the innovative medicine, additional benefits go to the education and scientific s stems in the country, that in turn positively in fluence economic progress.

Even Gunda Schumann of the U.N. Center onTransnational Corporations agrees, admitting that in light of the increasing importance of advanced tech nologies for the economic development of all co untries, an intellectual property system may in terms of attracting valuable transfer of technology and fostering local innovation probably have advantages for a developing country in conjunction with other factors such as: pursuing an open market strateg y; promoting technological collaboration between transnational cor porations and local companies; training of the lab r force for technologically high-skilled tasks; and promotion of local R&D. /p>

For the developed countries, including the U.S benefits from i mproving international intellectual property regimes and enforcement include: easier entry into developing country markets resulting from standardization of intel lectual property law; better recognition for U.S. products in the international marketplace b y virtue of stronger trademark protection; and tougher protec tion of domestic markets from infringement by importers who violate intellec tual property laws Attractive for Investment. Improved intellectual property protection by a developing country also will allow U.S. companies to sell more abroad since genuine American products, which are in high demand worldwide, would not have to compete with cheap counterfeits or pirated goods. Better protection also will make the developing countries more attractiv e for U.S. investment.

The reason: strong intellectual property protection and enforcement will allow U.S. companies investing abroad to earn a return on.theirinvestment without fear of having their ideas or inventions stolen 2 s Byusing the GAlT, WIPO, an d ach-domestic laws as the U.S. Trademark Counterfeiting Act of 1984, and the U.S. OmnibusTrade and Competitive ness Act of 1988, Washington can use the threat of sanctions as leverage in persuading other countries to improve their intellectual property l a ws. This leverage can also be exerted in the GAlT negotiations 4 Michael Hodin, The Role of Pharmaceutical Patents in Economic Development: A Mechanism for Lower Prices, High Quality Health Care and Assurances of Safety, unpublished monograph, 1989 5 Schu m ann, op. cit p. 6 5 Costs of lnadeguate lntellecfual Property Protection The U.S. International Trade Commission (ITC an official government agency that investigates and reports on international trade issues, estimated in 1986 that worldwide losses to U.S . industry that year as a result of inade quate foreign protep of intellectual property rights were between 43 bil lion and 61 billion JTC estimates these losses as $5 billion for the scientific and photographic industry 4.1 billion for computers and softw are 2.3 billion for electronics 2.2 billion for motor vehicles and parts 2.1 billion for the entertainment in dustry 1.9 billion for pharmaceutjcals, and $1.3 billion each for the chemical and petroleum refining industries.

These losses to American businesses represent transfers from innovators and legitimate producers to those who have used their ideas illegally. Not only is this a problem for Americans, it also creates a disincentive for Americans to invest overseas.

The E uropean Parliament estimates that counterfeiting patented products and copyrighted materials costs the European Community 100,000 jobs a year. According to a joint U.S European, and Japanese industry panel infringement of copyright and patent laws has cos t Britain alone 100,000 jobs in 1987.8 And according to the Financia2 Ernes, the European Parliament put the losses of British publishers from copyright infringements at f 130 mil lion 216 million] a year.g Waste of Capital. The U.S. and other developed co u ntry firms are not the only ones injured by the inadequate intellectual property protection of developing countries. Intellectual property right infringement wastes capital that otherwise would be available for economic growth. According to the study by j o int American, European, Japanese business group, increased infr ingement in those countries without adequate protection reduces the willing ness and ability of industry to commit to long-term planning and to develop the next generation of products, proces s es and services in, and specifically for, those country markets.1 This is especially the case in those industries requiring high research and development costs, such as pharmaceuticals, where an inadequate and inef 6 UGtedTtates IhtFmational TGde CoIikiii ssion,-Forei

iPr6tiction of IiitEllectiiZl Propertji RiglitS ad the Effect on U.S. Industry and Trade, Report to the United StatesTrade Representative, Investigation No 332-245, Under Section 332(g) of the TmrAct of 1930, Washington, D.C February 1988, p. H-3 7 Ibid,p.4-3 8 The Intellectual Property CommitteeKeidanrenAJNICE, Basic Framework of GATT Provisions on Intellectual Property: Statement of Views of the European, Japanese and United States Business Communities, June 1988, p. 14 9 Fioancial Times, De c ember 1,1988, p. 5 10 The Intellectual Property Committee/KeidaarenAJNICE, op. cit p. 14 6 fective intellectual property regime significantly inhibits development of firms in that sector.The joint U.S European, Japanese industry report states The huge dis p arity between the inventors cost and those of the imitator is a much more effective trade barrier than any tariff.11 STRENGTHENING INTELLECTUAL PROPERTY RIGHTS Because of the importance of intellectual property righG to economic development, America and m o st other industrial countries long have sought to increase the international protection of these rights. This has been difficult largely because many less developed countries insist on keeping their laws that allow them to confiscate the ideas of innovato r s and inventors lnteiiectual Property Rights in GATTs Uruguay Round Intellectual property is one of the most important issues in the Uruguay round of the GATT negotiations. GATT negotiators recognize that inade quate and ineffective protection of intellec t ual property rights seriously dis tort international trade. The Ministerial Declaration on the Uruguay Round, signed in 1986 by the trade ministers of all GATT member countries, authorizes a GATT committee to deal with intellectual property. It is called t he Negotiating Group onTrade-Related Aspects of Intellectual Property Rights, includingTrade in Counterfeit Goods known as the Negotiating Group onTRIPS The Declaration states that In order to reduce the distortions and impediments to international trade, and taking into account the need to promote effective and adequate protection of intellectual property rights, and to ensure that measures and procedures to enforce intellectual property rights do not themselves become barriers to legitimate trade, the ne gotiations shall aim to clariQ GATT provisions and elaborate as appropriate new rules and disciplines.

Negotiations shall aim to develop a multilateral framework of principles, rule and disciplines dealing with international trade in counterfeit goods, taking into account work already undertaken in the GATT.

These negotiations shall be without prejudice to other complementary initiatives that may be taken 11 Ibid 7in the World Intellectual Property Orjyization and elsewhere to deal with these matters The B attle Between Developed and Developing Countries Third World countries long have regarded the GATT with suspicion, char acterizing it as a place where wealthy developed countries advanced their in terests. To counter GATT, Third World countries in 1964 cr eated the U.N.

Conference onTradeand Development or UNCIm. Siiice then, UNnAD has served as an advocate of the special interests of the developing countries.

Generally UNCTAD is very critical, even hostile, to GATT. This is the case with respect to the Uruguay Round.

In a publication released last year by UNCIAD, entitled Unrguay Round Papers on Selected Issues, two reports on intellectual property make the developing countries agreement.13 Written by UNCIAD consultants Ab dulqawi A. Yusuf and Paolo Bifan i, these reports oppose improving intellec tual property protection in developing countries. They claim that stronger protection would inhibit technology transfer to those countries and would trigger huge price increases for products protected by strong p a tent trademark, and copyright laws surprise that they prefer to deal with the U.N.3 World Intellectual Property Organization (or WIPO) on intellectual property issues. In WIPO, as in other U.N. agencies, each country has one vote and decisions are by a si m ple majority. By contrast, GATT decisions typically are made by consensus. The Third Worlds overwhelming majority inWIP0 thus obviously allows them to impose their views on the industrial worlds minority bloc. Inside WIPO, in fact, the developing countrie s are organized formally into the Group of Developing Countries.

Non-Voluntary License. This Group has pushed WIPO to demand chan ges to the Paris Convention that would weaken patent protection severely.

The most contentious proposal would authorize a developing country to grant exclusive compulsory licenses if a patented product or process had not been produced, sold, imported, or sufficiently worked, in that developing country by the patent owner.

Though riddled with bureaucratic jargon, this proposal w ould undermine Given the developing countries hostility toward the GATT, it is no patent protection seriously. The term working a patent refers to produc tion, sale, or importation of the patented invention. A compulsory license 12 Quoted in Abdulqawi A. Y usuf, Developing Countries and Trade-Related Aspects of Intellectual Property Rights, Unrguay Round. Pawn on Selected Issues, UNCTAD~IlO, United Nations Conference on Trade and Development, New York, 1989, p. 185 13 See Abdulqawi A. Yusuf, Developing Coun t ries and Trade-Related Aspects of Intellectual Property Rights, and Paolo Bifani, Intellectual Property Rights and International Trade, in Urugurry Round. Papers on Selected Issues, UNCTAD/ITP/lO, United Nations Conference on Trade and Development, New Yo r k, 1989 8 which the developing countries call a non-voluntary license, would allow in dividuals, or any other agent chosen by the developing country, to work a patented invention or process without authorization and with no compensa tion to the patents ow n er In short, theThird Worlds WIPO proposal specifi cally would permit pirating and counterfeiting products and processes patented elsewhere Restricting Global Firms. Backers of.theW0 proposal say that it would force global firms to market their products i n theThird World or risk having then manufactured without their approval in theThird World.

The trouble is that determining when a patent is sufficiently worked would be left largely to the developing countrys government. Importing the patented product int o a developing country apparently no longer would qualify as working the patent. The result: Third World governments would declare that the patent has not been sufficiently worked. The patent then would be revoked and production of the product assigned to a local firm. U1 timately, innovative firms would stop doing business in that country.

To emphasize its point, WIPO even disputes GATS right to deal with in tellectual property issues. Stated WIPO Director General Arpad Bogsch of Hungary in an unpublished July 21,1987, memorandum entitled Role of WIPO in the Uruguay Round of Multilateral Trade Negotiations of GATP Any such definition of new norms, in the Uruguay Round, would risk caus ing serious confusion at the international 1evel.This is why, it is bel i eved, if dealing with the trade-related aspects of intellectual property rights, such definition should take place within the framework of WIPO The U.S. Proposal Washington has been trying to push the Uruguay Round negotiations not only in the direction o f firmer international protection for intellectual proper ty, but also toward a firrn commitment to enforcing intellectual property laws and settling disputes. The U.S. submitted formal suggestions in October 1987 for achieving the objective of the Negotia ting Group onTRIPS. A revised set of American proposals was submitted on October 13,19

88. This declared The objective of these negotiations remains unchanged, Le a GATT intel lectual property agreement to reduce distortions of and impediments to legitimate trade in goods and services caused by deficient levels of protection and enforcement of intellectual property right The U.S. proposal has two parts. The first calls for negotiations to set high international standards to protect patents, trademarks, copyrights, trade secrets, and integrated circuit layout-design. While all countries would no t have to have identical intellectual property laws, all would have to meet mini mum standards 14 Suggestion by the United States for Achieving the Negotiating Objective, Restricted distribution GATI Doc., MTN.GNG/NGll/W/14/Rev.l, 17 October 1988, p. 2 9 T o achieve the first goal of the U.S. proposal, American negotiators should 4 Insist that all inventions be patentable for no less than twenty years.

Patents should provide the right to prevent others from making, using, or sell ing the protected invention, including products as well as processes, for at least twenty years from the date patent protection is sought 4 4 Sst that trademark, which include service dks and certification marks, be registered for no less than ten years and be renewable indefinitely for ten-year terms. Systems for registration of trademarks and 4enrice marks should be provided on equal terms to both foreign and domestic firms, and at reasonable costs 4 Insist that the minimum term of copyright protection for all written or recorded w orks, should be for the life of the author plus fifty years. For anonymous and pseudonymous works, protection should be fifty years.

Protection should be extended to all forms of creative expression, including such traditional forms as dramatic, literary, and musical works, such newer forms as computer software, and forms yet to be developed 4 4 Ensure that trade secrets be protected against unauthorized dis closure, including disclosure by governments. This should be guaranteed as long as the trade secret is not public knowledge or general knowledge within an industry 4 4 Urge that semiconductor chip layout and design for computers be protected for at least ten years from the date of first commercial exploitation or from the date of registration, whichever date is earlier national borders to stop trade in pirated recordings, counterfeit prescription drugs, and other goods violating intellectual property rights. This U.S proposal also calls for a mechanism within the GAlT to settle disputes.

Penalties for infringement should include such civil remedies as fines and monetary restitution, and such criminal sanctions as prison sentences.

Developing countries would receive no special treatment or exemption from the obligations under the code Developing Countries Counter In an effort to counter the U.S. and developed country proposals, India sub mitted a report to the GATT Negotiating Group onTrade Related Aspects of Intellectual Property (TRIPS) on July 10,19

89. This Indian report states India would like to poi nt out that the scope of this [Uruguay Round] agenda item is limited to trade-related intellectual property rights. For the reasons The second part of the U.S proposal calls for stronger measures at the inter 10explained in the paper, India is of the view that it is only the restrictive and anti-competitive practices of the owners of intellectual property rights that can be considered to be trade-related because they alone distort or impede international trade.15 property rights erect barriers to trade. Sp e cifically, the Indian proposal declares that 4 4 Commercial working of (producing, selling, or importing) a patent in a host country should be considered a fundamental obligation of the patent holder 4 4 Compulsory licensing should be allowed for whatever the reasons the host country sees fit 4 Developing countries should be allowed to exclude patent rights for certain sectors such as pharmaceuticals and chemicals, or at least provide only patents for processes, or methods of production, rather than for pr o ducts themselves 4 4 Developing countries should be able to grant patents with a shorter duration than those granted in developed countries; and 4 4 No curtailment of developing countries freedom to regulate trademarks in their domestic markets should be c ontemplated.16 Brazil too has championed developing countries position in the Uruguay Round. It demands special treatment for underdeveloped countries. This is not surprising since Brazil, of course, is one of several developing countries that refuses to provide patent protection to foreign pharmaceutical and chemical companies.This erupted in a serious trade dispute between the U.S and Brazil in 19

88. After Brazil refused to alter its stand on pharmaceutical and chemical patents, the U.S. imposed 100 per cent tariffs on imports of Brazilian drugs, some electronic products, and paper products. Brazil also refuses to provide adequate patent protection for computer software. The U.S. has yet to act on this To this India adds what is a core claim of theThird W orld: that intellectual Given the hostility of developing countries toward protection of intellec- tual property, Washington should reinforce its multilateral efforts in GAm and WIPO with unilateral actions to protect intellectual property U.S. UNIIATERAL ACTIONS ON INTELLECTUAL PROPERTY RIGHTS 15 Standards and Principles Concerning the Avdabfity, Scope and Use of Trade Related Intellectual Property Rights Communication from India Restricted distribution GATT Doc MTN.GNG/NGll/W/37,10 16 bid JU~Y iw, p. 2 1 1 One unilateral action would be to stand firm against other nations objec tions to Section 337 of the U.S. Omnibus Trade and Competitiveness Act of 19

88. Section 337 originally was part of theTariff Act of 19

30. When first writ ten, the provision required that a holder of a patent, copyright or trademark who wished to bring a suit against an alleged infringer of his or her intellec tual property had to prove both the infringement and demonstrate real injury.

Proof of injury was quite difficult, and oft en very costly for small firms. The reSsedSection 337 under ihe 1988 Trade Act requiresno demonstration of injury. A petitioner under 337 now merely has to prove infringement in order to elicit a favorable ruling by the U.S. International Trade Commission flC Citing the revised Section 337, the U.S. took action against the Nether lands-based company Akzo. The lTC had ruled that Akzo hadinfringed on the patent covering high strength, aramid, fibers manufactured by the E.I. du Pont deNemours and Company, hea d quartered Wilmington, Deleware European Protest. This U.S. action angered the European Community which asked GATT to convene a panel to investigate the matter.This panel on January 16,1989 ruled against the U.S saying that Akzo and other foreign companies charged under Section 337 of the U.S. trade law are denied the rights to court hearings available in similar cases involving domes tic companies.

The U.S. blocked adoption of the panels report on February 8,1989, in the GAlT Council and claimed that the p anels findings were too narrow an in terpretation of the general exception provisions in the GAlT.17 The U.S. feared that, if the report were adopted, it would set a bad prece dent requiring GAlT examination of a broad range of trade practices cur rently c onsidered acceptable under GATT. After seven more attempts by the GATT Council to adopt the panels finding, the U.S. finally agreed on November 7,1989, to lift its objections. Yet U.S.Trade Representative Carla Hills emphasized at that time that the U.S. d idnt join that consensus or ac cept the reports findings.l8 U.S. Leverage. The GAlT Council ruling gives leverage to American delegates at the Uruguay Round.They can offer U.S. compliance with the GAlT ruling in exchange for strengthened GATT protection o f intellectual property.To maintain this leverage, the U.S. should not honor the GATT decision on Section 337 until the GATI pfodiici%%fi acreptable ageement on intellectual property. The Office of the U.S. Trade Representative can claim correctly that com p liance will require changes to Section 337 that only Congress can enact and that a successful outcome in GATTs intellectual property negotiations is a near-certain precondition for congressional action 17 Financial Ernes, February 8,1989, p. 2 18 Wall Str eet Journal, November 8,1989, p. Al2 12 on 3

37. In fact, Deputy U.S.Trade Representative Rufus Yerxa has stated the US was prepared to discuss appropriate changes in how it handled in fringing imports against the backdrop of an emer ng international conse nsus of greater protection for intellectual property Using Super 3

01. Another unilateral action the U.S. can take has been created by Section 301 of the Trade Act of 19

74. This authorizes the Presi- dent to take direct action against countries engaging in unfair trade practices.

The 1988 Trade Act broadened the scope of Section 301 and transferred the enforcement mechanism from the President to the U.S. Trade Repre sent ative Thus was born what has become known as Super 301 In practice, Super 301 requires the Trade Representative to identify those countries, like Brazil and Japan, erecting the most serious barriers to the im port of U.S. goods and services. Super 301 all o ws for direct retaliation against such countries if negotiations to lower the barriers make no progress within three years 1P Inadequate protection of intellectual property rights is one of the most easi ly identifiable non-tariff trade barriers. As such, Super 301 offers powerful leverage to improve the intellectual property regimes of reluctant Third World countries RECOMMENDATIONS 19 Financial 1 The U.S. must use unilateral as well as multilateral mechanisms to promote the strengthened intellectual prop erty rights protection worldwide.

The U.S. should continue to work through the multilateral channels of the GATT and the U.N.3 World Intellectual Propery Organization. It also should use Super 301, Section 337 of the U.S. trade law, and other unilateral measures.

To achieve better patent, trademark, and copyright protection and more ef fective mechanisms for enforcing the laws providing that protection, the U.S should Withdraw from UNCTAD. The regular U.N. budget gives some $66 million annually to the U.N. Conference on Trade and Development. Of this America pays approximately $17 million. The U.S. should reduce the portion end all participation in UNCIAD. This U.N. body consistently has demonstrated that it is an enemy of world trade. It promotes policies that weaken and destroy intellectual property rights, thus harming American inter ests and, as important, the economic interests of developing countries Negotiate assertively at GATT. The U.S. is pursuing a very sound policy regarding intellectual propert y in the Uruguay Round of GATT talks of its contribution to the U.N. that goes to UNCX-W and th-e U.S.should I rres, November 8,1989, p. 8 13 U.S. Trade Representative should continue to push for a comprehensive agreement on intellectual property rights wi t h the minimum standards and enforcement provision set forth in its October 1988 recommendations. These standards include: twenty-year patents on all inventions, products as well as processes; ten-year trademark registration with indefinite renewals; copyr i ght protection for the life of the author plus fifty years; protection from un authorized disclosure of trade secrets; and ten-year copyright protection for semiconductor chip layouts sirid designs 4 4 Continue existing efforts inWIPO. U.S. efforts to mai n tain and strengthen standards of intellectual property protection at the World Intellec tual Property Organization should not be abandoned. Continued vigilance against the attempts by the developing countries to weaken the already inef fectual Paris Conve ntion will be a perennial task of U.S. diplomats in Geneva 4 4 Use the leverage of Sections 337 and 3

01. The U.S. should use unilateral pressure to extract concessions during bilateral and multilateral negotiations. Because of less developed countries opp osition to tougher in tellectual property protection, the industrial nations at GAlT may be tempted to yield on intellectual property during the Uruguay Round in return for concessions on such areas as agriculture and services. If so, the U.S. Trade Repre sentative should oppose it by stressing that an intellectual property agreement is necessary to persuade Congress to change Section 337 of the U.S. trade law 4 4 Give technical assistance to countries willing to improve protection.

The U.S. could offer fun ding to effect the changes necessary to protect intel lectual property rights. The U.S for instance, could help set up patent offices and enforcement agencies. The staffs of those new agencies, moreover, will need training in the technicalities of intelle c tual property law. The U.S. can provide this CONCLUSION Protected intellectual property rights are essential for economic growth. A countrys capacity for development and utilization of technology depends directly on its ability to provide its people with i ncentives for innovation and based Nationd Economic Research &sociat&: the degree of intellecftual property protection directly affects the profitability of research and develop ment projects, and thus the resources allocated to R&D. It determines the ex p ected number of new products, processes, literary works and the like. Thus the resulting policy initiatives will have a profound effect on the course of technological progress around the world.20 creativity. Writes economist Richard Rozek of the White Pla i ns, New York 20 Richard P. Rozek, Intellectual Property and Economic Growth,, Summer 1989, p. 24 14 World Leader. Washington is on the right track in the GAlT negotiations on intellectual property. If successful, the benefits to U.S. industry will be sub stantial. Even greater will be the benefits to the economies of developing countries that agree to high standards of intellectual property protection and effective enforcement By a flexible strategy of both multilateral and unilateral tactics, incl u ding assertive negotiating at the GATI' and WIPO and using the leverage contained in Sections 301 and 337 of the U.S. trade law the U.S ai the world's largest importer (and exporter),.is'well positioned to lead the world toward an era of strong protection and effective enforcement of intellectual property rights With the ever-quickening pace of technological advancement, American competitiveness and the health of the international economy are dependent on the success of these efforts.

Mark A. Franz Jay Kingham Fellow in International Regulatory Affairs Director, United Nations Assessment Project 15

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