The Special 301 Committee: representatives from the Departments of Agriculture, Commerce, Justice, State, Labor, and Health and Human Services, as well all the USPTO, Copyright Office, and USTR.  Probir Mehta from USTR chaired the hearing.

The first two witnesses represented the governments of Bulgaria and the Ukraine, and they described the actions their countries had taken to strengthen IPR protection, in hopes of getting off the list.  The following notes describe testimony and Q&A from the other witnesses who testified about copyright.

US India Business Council (USIBC)

USIBC President Mukesh Aghi testified.  The organization represents over 400 global companies doing business in both nations.  He talked positively about India’s National IPR Policy, which he noted will become worked into the curriculum in centers of learning.  He mentioned that the government has hired 459 new patent examiners and 100 trademark examiners to combat the backlog of applications.

The Delhi High court has upheld rulings for US IP owners.  Compulsory licenses should be granted only as a last resort, on public health grounds, and after the consideration of all the facts. It’s a problem that patents have been denied under Section 3(d) of the Patents Act.

State noted that USIBC recommended placement of India on the Priority Watch List last year, and asked if they had a listing recommendation for this year.  Aghi said that India was moving in the correct direction on IP policy, so his group is deliberately not recommending anything at this time. But he is interested to see what changes have been made in six months.

USPTO said that India had granted only one biotech patent to an American firm, and asked if Aghi thought India should grant more.  He said that USIBC is encouraging India to grant more, but declined to talk about specific numbers.

Treasury asked if the New IPR Policy has resulted in any substantive changes. Aghi said his group’s members were happy with the ideas in the policy, and want to wait six months to evaluate whether it leads to substantive changes.

PIJIP

My testimony is here, and it had four key points:

  • U.S. firms that rely on copyright exceptions benefit when foreign nations adopt open, flexible and general exceptions such as fair use
  • Copyright industries still earn money from countries that adopt fair use
  • The Special 301 Committee should include analysis of copyright limitations when evaluating whether a country provides adequate and effective protection of IP
  • The 2017 Special 301 Report should highlight countries that are moving to adopt more flexible copyright practices in its “Best Practices” section

Labor asked if I had examples of countries that had instituted bad laws on copyright limitations, which then led to negative outcomes for U.S. firms.  I cited the example of the snippet taxes in Germany and Spain, and promised to follow up in greater detail in the post-hearing comments.

Copyright Office (Maria Strong) noted that last year’s PIJIP Comments described our survey of Copyright User Rights, and she asked for an update on it. I told her that we distributed the survey at the end of last year and are currently receiving completed surveys from respondents. It is a long survey for the respondents to fill, comprised of 129 detailed questions about copyright law over the period 1970 to present. We plan to show the raw results at the CC Summit in April.

Knowledge Ecology International (KEI)

James Love noted that KEI’s prepared submission focused on employment in the IP-intensive industries.

He noted that new drugs are extremely expensive (i.e.- cancer drugs costing more than $10,000/month), and there is a need to reconcile funding for innovation and problems with high drug prices. KEI is in favor of reforming the incentives we give innovators.  In particular, trade policy should aim to make trade partners share the burden of R&D, rather to make them pay high prices. The US could ask other countries to directly fund innovation or embrace other funding mechanisms.

Copyright Office asked Love about the section in KEI’s written submission calling for USTR to consider a WTO challenge against European laws that restrict the quotation right.  Love answered that KEI is concerned about the ancillary approaches in Spain and Germany.  Quotation and News-of-the-Day have always been mandatory exceptions. The US has a big stake in this because American firms are the main producer of social media. It is surprising there has not been a loud official response on this. Also, the snippet taxes are sold overseas as an anti-American action.

USTR asked about KEI’s comment about low-quality patents causing problems for American firms operating in other nations.  Love noted that the US used to issue the most low-quality patents, but China has copied this practice, and now American firms are getting in trouble for violating low quality patents in China.  Everyone should agree that issuing bad patents, like patents on pre-existing inventions, is bad.

USPTO asked about KEI’s comments that streaming services have reduced piracy, noting that other comments said piracy is still a big problem.  Love answered that of course piracy is a legitimate concern, but that there is less of it now that streaming services have changed the game.  It also allows greater opportunities for price discrimination.

Intellectual Property Owners Association

The witness at first spoke in broad terms, about how their members saw efforts to weaken IPRs overseas.  She thinks it is mistaken to link IP to problems with access to goods. Demands to chip away at IPRs include calls for compulsory licensing and technology buyouts.

At WIPO, many countries want to expand limitations and exceptions to patents.  They want WIPO to support a detailed exchange of experiences on limitations and exceptions to patents, with the end goal of creating a how-to guide.  This is typical of the type of activities that are normal at WIPO these days, and that are funded by PCT applications.  The U.S. government should counter these attacks on IP.

Many trade secret laws don’t cover as much as they should, and some nations encourage theft of trade secrets.

USPTO referenced the IP Owners’ Assoc.’s comments (from an earlier year?) which claimed South Africa’s 2013 IP policy weakened the country’s IP system.  She asked the witness to elaborate. Witness promised to follow up with a written answer.

Commerce asked about the Association’s written comment that US firms need invitations to participate in China’s standards-setting activities.  Witness said this is a problem – firms need to be involved.

Justice asked witness to comment on the Association’s comment that China’s antimonopoly law might cause IP owners trouble, and asked for some instances off threatened anti-monopoly law actions. Witness said firms are concerned by the lack of clarity in the law.  For instance, there is no definition of “market dominance” so firms need to exercise extreme caution to avoid running afoul of such laws.

Internet Association

Ari Govienco, Director of Trade and Innovation, testified.  He claimed that US platforms are responsible for 6% of US GDP and 3% of employment. The U.S. has a trade surplus in digital services, and other exporting firms rely on the internet to boost trade.

USTR must highlight countries that misuse copyright to deny access to markets for US internet firms.

Most problematic foreign laws:

  • Ancillary copyright laws in Europe (snippet taxes).  These are restrictions on things that are legal in the U.S. and legal under the Berne Convention.  In Spain, the ancillary copyright law led to a loss of consumer surplus and a reduction of 11% value in Spain.  These laws are not limited to search engines.
  • Proposed copyright directive in the EU that would change secondary liability. This would require a broad range of services to monitor their customers’ content.  It has an inadequate safe harbor. Internet Association wants USTR to push back.
  • France’s “image indexation law”. Under this law, US firms need to get licenses to index things. There is no opt-out for artists.  It is also hard to tell which images online are French and therefore subject to the law.
  • Ukraine’s Intermediary Liability Law has many measures that do not meet DMCA standards.
  • Australia’s laws on safe harbors for secondary liability do not meet FTA requirements.
  • China – cloud services must transfer trade secrets to do business in China.

State asked Govienco to elaborate on the last point about the transfer of trade secrets, and he said he would do so in writing.

Copyright Office asked how business location decisions are affected by the lack of a safe harbor in the law.   Govienco answered that when they see an unbalanced law in place, they see a significant risk in operating in that market and potentially locating there.  He again brought up Australia, where the law only protects “carriage providers”.

International Intellectual Property Association (IIPA)

Kevin Rosenbaum, Counsel to IIPA testified.  He said that, given comments made by some others, the Committee should review the language that instructs USTR to conduct the Special 301 review.  It is supposed to identify “countries that deny adequate and effective…”  But some witnesses are asking the Special 301 Committee to dilute the process by expanding it to cover the areas where IP does not apply.  IIPA would like the Committee not to do this.

IIPA has identified 16 countries for the PWL and WL.  Their written comments include eleven specific threats to IP they encounter around the world.

Copyright reform efforts have become forums to dilute copyright protection. IIPA would like USTR to push back on this, and to ensure copyright limitations meet the three-step test.

Regarding online markets selling infringing goods, the failure of host countries are polluting their neighbors and trading partners.

IIPA also argued that non-IP market access restrictions that keep IP owning firms out of markets allow pirates to set up shop in the void.

Treasury asked Rosenbaum to elaborate on its written comment that the primary challenge in Mexico is the rise in illegal camcording. He said they are not sure what is driving the increase, but it is significant. The proper solution would be to create criminal liability for camcording.  And to encourage theaters to get involved in fighting it.

Justice asked about China’s exporting of devices that advance piracy. Rosenbaum said the devices in question used to be referred to as Set Top Boxes, but now they are called ‘Illicit Streaming Devices’. They used to be confined mostly to Asian markets, but now they are spreading. Many of the devices depend on apps that facilitate access to the illicit content.  China’s copyright office should address this.

Global IP Center, U.S. Chamber of Commerce

Patrick Kilbride testified, and much of his testimony described the IP Index, released by GIPC last month. It covers 45 economies that comprise about 90% of world GDP.  It shows that countries with stronger IPR have good outcomes, so strengthening IP enforcement is not a concession other countries need to make – it is something that is good for them too.  Strength of IP correlates with positive outcomes at every income level, too.

GIPC has seen many positive developments in the last year:  more use of specialized IP courts, more use of patent prosecution highways, and more attention to trade secrets. However, it has also seen negative developments:  more forced localization rules (incl. Ecuador, South Africa, and Russia), compulsory licenses, and the proliferation of ISDs (esp. China).

In the global environment, trade agreements will be important. Many WTO members have not implemented their TRIPS obligations.

Discussions of world IP standards should be held in the proper agencies: WTO, WPIO and sometimes WHO.  However, activists have pushed discussions of IP policies into other forums. UNDP recently issued guidelines on drug patent applications. The UN High Level Panel report relied on flawed premises to make bad recommendations.  Activists continue to venue-shop the band UNHLP recommendations.  This harms access to innovations (because the innovations won’t occur without strong IP).

Commerce asked Kilbride to discuss voluntary agreements, and he said that the ecommerce space is where they have really taken off.

USTR asked Kilbride to explain the fact that India’s performance in the Global IP Index improved. He noted that India has made valuable commitments through its IPR policy.  Also, the index added new indicators this year, and some countries improved due to this. However, problems still exist, including Section 3(D) and India’s guidelines on computer-aided inventions.

Footwear Distributers and Retailers

Just a quick note here – the witness said Chinese ecommerce sites need to filter and remove counterfeit goods.

Computer and Communications Industry Association (CCIA)

Matt Schruers testified. He noted that CCIA’s companies are exporters of goods and services who help others export goods and services.  International norms concerning limitations and exceptions affect CCIA’s firms.

The ancillary right / snippet tax laws in Germany and Spain form an exclusive right over what had been a recognized exception. It violates Berne Art. 10.1, and maybe Art. 2.8 as well.  After the Spanish law passed, one firm was forced to leave the market; had they stayed they would have been subject to accumulating liability.

The fact that there has been no pushback from the U.S. on these bad laws has encouraged other countries to consider similar laws. Examples include the French law on image indexing.  The European Parliament is considering a copyright reform proposal that includes a Europe-wide ancillary copyright.  The Special 301 Report should identify this as a market access barrier.

In 1998, the U.S. passed the DMCA to govern intermediary liability.  It is a good law, and we have insisted on this type of intermediary liability scheme in all our FTAs since 2003.  However, Australia has tried to implement intermediary liability rules that only protect Australian firms, and this is not compliant with the Australia-US FTA.

Colombia has not implemented intermediary liability rules as required by its trade agreement with the US

In some countries, takedown requirements are too tough.  For instance, Ukrainian law has a 24 hour “shot clock.”

USTR noted that Schruer’s testimony had not focused on China, and asked how Chinese law treats safe harbors.  Schruer didn’t want to comment on Chinese law without having a chance to review it.

USPTO said that the Special 301 framework requires the committee to identify countries that “deny adequate and effective protection of intellectual property rights” and asked how CCIAs requests fit into this framework.  Schruers answered that its members meet the definition of US persons who rely open intellectual property.  There may be a question whether the statute requires a connection between “persons” and denial of access (this is not actually in the text, but may be implicit).

Business Software Alliance (BSA)

Leticia Lewis testified that BSA has highlighted market access issues for the third year in a row.  Market access provisions in Special 301 are an important but under-utilized. They should be used more often to help firms that are harmed. This would fit well with the 2017 Trade Agenda that the Administration released last week. For instance, security concerns are frequently used as barriers to keep American firms that rely on IP out of certain countries.

Regarding IP, illegal software accounts for 39% of all software use around the world.  Government offices and SOEs are often big culprits.

State asked Lewis about the use of security concerns as trade barriers.  She said that the concern is real among their members, but the actual impact is unclear.

Treasury asked why there has been an increase in Russian piracy, and whether the Russians have any will to fight it.  She answered that the reasons behind the increase are unclear, but that Russia lacks a decent deterrent.

Alliance for Fair Trade with India

Brian Pomper began his testimony asking the Committee to put India on the Priority Watch List.  AFTI appreciates India’s recognition of its shortcomings through the IPR Policy and report, including the need to increase enforcement capacity.  They appreciate that no compulsory licenses have been issued for some time, yet the threat remains.

“Irritants” with India on IP include forced localization measures, lack of regulatory data protection, patentability criteria under Section 3(d), and weak copyright protection.

USTR should continue to engage India through the US-India Bilateral Dialogue, it should come up with a robust Special 301 Action Plan, and it should conduct an Out-of-Cycle Review.

Copyright Office asked Pomper to provide details about the weak copyright protection in India.  He said that anti-camcording legislation was needed, and that there is widespread copying of textbooks.

USPTO noted that Modi has pledged to get Indian patent law in line with international norms.  What needs to change, and what are the priorities?  Pomper said that India was moving in the right direction with this, and the environment is more positive.  Still, Section 3(d) is an “irritant”, and AFTI thinks it is not TRIPS compliant.  AFTI would also like to see data protection introduced.

DHHS asked how the lack of data protection affected US firms. Pomper said that firms need stable, secure environments where there products are protected from copying. In the long term, it may not be viable to continue to invest in countries that do not adhere to basic WTO requirements.