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TWN Info Service on Health Issues (Feb14/01)
13 February 2014
Third World Network

Intellectual property issues dominate the USITC public hearing on India

Delhi, 12 February (K M Gopakumar) – India’s use of flexibilities regarding intellectual property  is challenged by United States industry.

The United States International Trade Commission (USITC) held a public hearing on 12-13 February 2014 as part of its investigation titled “Trade, Investment and Industrial Policies in India: Effects on the US Economy”. 

[This investigation was initiated at the joint request of the Senate Committee on Finance and the House Committee on Ways and Means in August 2013. In their Joint Letter these Committees requested USITC to prepare a fact-finding investigation report by 30 November 2014. The joint letter dated 2 August asked the USITC to conduct an investigation regarding Indian industrial policies that discriminate against US imports and investment for the sake of supporting Indian domestic industries, and the effect that those barriers have on the US economy and US jobs. Prior to this letter 17 industry and trade associations, including Pharmaceutical Manufacturers of America (PhRMA), wrote to the US President to use bilateral pressure including diplomatic and trade tools to reverse India’s policies on local content and intellectual property protection. This was followed by three more letters from US lawmakers on the same issue: http://www.ip-watch.org/2013/06/20/170-members-of-us-congress-pressure-india-on-ip-rights/ ]

The immediate reason cited in the letter for the investigation are two viz. the local content requirements in green technologies and information technology, and intellectual property protection and enforcement in the area of patent and copyrights.

Regarding the local content rule the letters stated: “India has introduced new localization – forcing measures such as local content and technology transfer requirements in the green technology and information and communications technology sectors”.

On IP protection and enforcement the letter remarked: “India has not yet taken action to fully and effectively protect and enforce copyrights, including in the digital environment and has applied its patent law in a discriminatory manner, particularly against innovative US pharmaceutical companies, so as to advantage its domestic industries. Further, it stated “Beyond any particular action India has taken, the Government has enunciated a broader policy objective to develop and support Indian domestic industry by forcing foreign firms to use local facilities and suppliers  and to transfer their intellectual property to Indian entities.”

The report of the USITC is to provide the following information as requested in the letter:
“An overview of trends and policies in India affecting trade and foreign direct investment in that country’s agriculture, manufacturing and service sectors, as well as the overall business environment. The overview will take a historic view, but focus on the period since 2003. It will include examples of changes in tariff and nontariff measures, including measures related to the protection of intellectual property rights, and other actions taken by India’s government to facilitate or restrict the inflow of trade and FDI.

A description of (1) any significant restrictive trade and FDI policies currently maintained or recently adopted by India as identified by Commission research; (2) the sectors in the U.S. economy most affected by these restrictive policies; and (3) the general competitiveness of sectors in India’s economy that are subject to the identified restrictions.

Several case studies that examine the effects of particular restrictive measures on U.S. firms that exports to or invests in India, or that have not done so because of the measures. To the extent feasible, the case studies will address the impact of the restrictive measures on both large and small and medium-sized enterprises.

To the extent feasible, a quantitative analysis of the economic effects of India’s identified restrictive measures on the U.S. economy as a whole, on U.S. trade and investment, and on selected sectors of the U.S. economy.

Based on the survey and analysis of results, and to the extent feasible, a summary of U.S. firms’ perception of (1) recent changes in India’s trade and investment policies in selected sectors and (2) the effects of these changes on U.S. firms’ strategies towards India (e.g., reducing investment or altering product mix), and analysis of whether the effects of these policy changes differ by firms’ characteristics, such as size, IP-intensiveness, or export status.”

The report will be based based on a public hearing, written submissions and a survey. The survey asking firms exports goods  India or to its foreign affiliates or export services or sale services through their foreign affiliates to provide scores on 13 factors which affect their business in India. Three factors are on IP. These are : inadequate protection of IP, inadequate protection of regulatory data  and involuntary technology transfer (including compulsory licensing).

Business firms, associations, academia and public infest groups are attending the public hearing. The list of participants shows the dominance of intellectual property issues. The public hearing started on 12th February  the afternoon and will end on 13th   February evening.

Out of the 22 witnesses listed for the public hearing 20 are closely working on intellectual property issues. All these 20 witnesses except for 5 witnesses represent industry. See: http://www.usitc.gov/press_room/documents/thisweek/wl1_021014.pdf

The industry-linked witness are: Alliance for Fair Trade with India, US Chamber of Commerce and Global IP Centre, International Intellectual property Alliance (IIPA),  Information Technology and Innovation Foundation (ITIF), US India Business Council (USIBC),  Crop Life America, National Association of Manufactures (NMA), Biotechnology Industry Organization (BIO), Association of Clinical Research Organization, (PhARMA) and Bayer Health Care.

Three Indian industry associations are also listed as witnesses. These are: Confederation of Indian Industry (CII), National Association of Software and Service Companies (NASSCOM) and the Indian Pharmaceutical Alliance.

There are three public interest groups viz. Knowledge Ecology International, The Access Campaign of M้decins Sans Fronti่res (MSF), and Pubic Citizen. There are also two IP academicians viz. Srividya Raghavan (University of Oklahoma, College of Law) and Sean Flynn (American University Washington DC). 

All the industry associated witnesses from the US advocate for a IP maximalist position. Most of these witnesses demanded the inclusion of India in the Priority Foreign Country list under the Special 301 Report.  Except for ITIF, an IT industry funded foundation, Crop Life, an association of seed, pesticide and other agrochemical corporations, Bayer and USIBC made submissions on the Special 301 Report in 2014. However, these witnesses are represented through other associations like BIO and PhRMA.

All US industry related witnesses in their Special 301 submissions demand designation of India as a Priority Foreign Country. These groups cited the following practices or actions by the Indian Government/Patent Office/Courts as hurting their intellectual property rights in India.  These are:  use of flexibility in limiting the scope of patent protection, pre- and post- grant opposition of patent, use of compulsory license and delay in the grant of patents. According to academicians and policy makers TRIPS provides the flexibility to do all the above-mentioned acts. Some submissions argue that India should be classified as a Priority Foreign Country to prevent other countries from emulating India’s approach to IP rights. Submissions also cite India’s opposition to IP maximalist agenda in various international forums  like  World intellectual Property Organization (WIPO), UN Framework Convention on  Climate Change (UNFCC) WTO etc. as a valid reason for Priority Foreign Country designation.

The Alliance for Fair Trade with India is an alliance of a coalition of the Association of Equipment Manufacturers, American Foundry Society, American Business Conference, Biotechnology Industry Organization (BIO), California Manufacturers & Technology Association, CropLife, Emergency Committee for American Trade, Association of the Nonwoven Fabrics Industry, Motion Picture Association of America, National Association of Manufacturers, National Electrical Manufacturers Association, National Foreign Trade Council; PhRMA; Recording Industry Association of America; Solar Energy Industries Association, Telecommunications Industry Association; US Chamber of Commerce, Global Intellectual Property Center.

In its Special 301 submission the Alliance for Fair Trade with India stated “India’s IP practices are among the most damaging in the world, and clearly rise to the statutory threshold required for a PFC determination.” Therefore it calls for the designation of India as a PFC under Section 182 of the Trade Act of 1974, in its annual Special 301 Report. It cites India’s use of compulsory license, rampant copyright infringement, lengthy history as a bad actor with regard to IPR and failure to take productive steps to remedy concerns in bilateral and multilateral forums. Lack of protection of confidential test data and other data is cited to show India’s lengthy history as a bad actor on IP.  The submission alarms USTR that “…some of these discriminatory IP practices have begun to be emulated by other developing countries, as India has publicly advocated that other countries adopt its discriminatory IP policies. This is a trend which will continue unless the U.S. government takes appropriate action.”

The US Chamber of Commerce, Global Intellectual Property Center recently published an International Intellectual Property Index, ranking India on the bottom among 25 countries. India scored 6.95 out of 30. The US Chamber in its Special 301 submission stated: “The Chamber strongly recommends that India be designated a Priority Foreign Country. Over the past two years, the IP environment in India has deteriorated rapidly, making India an outlier in the international community. While the then-President of India declared this decade to be India's "Decade of Innovation" in 2010, India's policies are inconsistent with the former President's rhetoric. India has the weakest IP environment of all countries, according to both the 2014 and 2012 editions of the Chamber's International IP Index, which maps the IP environment in 25 countries around the world based on existing international standards and best practices”.

International Intellectual Property Alliance “is a private sector coalition, formed in 1984, of trade associations representing U.S. copyright-based industries in bilateral and multilateral efforts working to improve international protection and enforcement of copyrighted materials and open up foreign markets closed by piracy and other market access barriers”. Members of this alliance includes: Association of American Publishers, Business Software Alliance, The Software Alliance, Entertainment Software Association, Independent Film & Television Alliance, Motion Picture Association of America, National Music Publishers, Association and Recording Industry Association of America.

The submission terms the following areas as problematic and not addressed in the last amendment of India’s Copyright Act. These are: inadequate protection for access control technological protection measures and against trafficking in circumvention technologies, devices, and services; ownership and assignment restrictions which threaten the fabric of longstanding business models; and TRIPS- and Berne-incompatible compulsory and statutory licenses. Further it states “Copyright holders generally have positive relationships with Indian authorities, including the Ministry of Human Resources and Development (MHRD). Several effective court mechanisms remain viable, including Anton Piller (ex parte search), John Doe, and Mareva (asset freezing) orders, and police will often take enforcement action on their own recognizance (so-called suo moto cognizance) “

The US-India Business Council is controlled mainly by the IP maximalist lobby and campaigns against safeguards in the Indian patent law such a section 3 (d) which aims at preventing the practice of ever greening of patents. The Council expressed its unease on the Supreme Court Judgment to reject patent protection to an ever-greening of a patent claim of Novartis on its cancer drug imatinib mesylate. In April 2013 a press release stated that, "Innovation requires the reward and protection of intellectual property. We are certain India's leadership understands this, and that creating and maintaining an environment that inspires and enables innovation is in India's ultimate, long-term interest. Such an environment is crucial if India is to attract investment in this or other highly complex sectors" (http://www.usibc.com/press-release/us-india-business-council-expresses-unease-over-supreme-court-indias-ruling-novartis), the USIBC also published a report arguing for the deletion of Section 3 (d) of the Patents Act.

BIO in its submission stated that “The Indian generic industry routinely uses this opposition process to delay the grant of U.S. biotechnology patents in order to produce their own generic copies of products that enjoy meaningful patent protection in other countries. Patent term extensions do not exist in India, which exacerbate the problem and contribute to a loss of value for legitimate U.S. biotech patents in India. Due to the broad nature of post-grant challenges, unlimited pre-grant opposition should be abolished or severely curtailed to better reflect international practice”.

Further, the submission t also noted the post grant revocation of patents by the Indian Intellectual Property Appellate Board. The submission stated: “Many of these patents were revoked on multiple grounds including obviousness and inventive step even when these patents are valid on the same standards in other patent offices around the world. If the Indian patent system is an outlier for granting patents, it makes it very difficult for biotechnology companies to continue to invest in India”.

The National Association of Manufactures (NAM) demanded designation of PFC status on the ground of India’s opposition in various international forums against the IP maximalist agenda. NAM stated: “In multilateral forums like the UNFCCC (UN Framework Convention on Climate Change), the WTO and WIPO, India is leading efforts to weaken existing intellectual property rights protections and to position IPR as a barrier to economic development and access to technology despite all evidence to the contrary. At the WTO, India has claimed that the intellectual property system has no links to incentivizing innovation. These claims are a distraction from urgent business and threaten to undermine the IPR of industries in the United States, India and many other countries around the world”.

PhRMA, the most aggressive lobby group on IP protection and enforcement, terms decisions of patent office and courts to reject patents as undermining the rights of innovative companies. Further, it attacks Section 3(d) of the Patents Act. The submission stated: “Over the past two years, the Indian Patent Controller and the Indian judiciary have issued several intellectual property decisions that undermine the rights of innovative biopharmaceutical companies. India‘s legal and regulatory systems pose procedural and substantive barriers at every step of the process, ranging from the impermissible hurdles to patentability posed by Section 3(d) of the India‘s patents act, to the threat of compulsory licensing on specious grounds, to pre-grant and post-grant opposition proceedings.”

According to PhRMA, Section 3(d) is inconsistent with the TRIPS Agreement. The submission reads: “Additional requirements for patentability beyond that the invention be new, involve an inventive step and capable of industrial application, are inconsistent with the TRIPS Agreement. Article 27 of the TRIPS Agreement provides a non-extendable list of the types of subject matter that can be excluded from patent coverage, and this list does not include ‘new forms of known substances lacking enhanced efficacy,’ as excluded by Section 3(d) of the Indian law. Therefore, Section 3(d) is inconsistent with the framework provided by the TRIPS Agreement.

Moreover, Section 3(d) represents an additional hurdle for patents on inventions specifically relating to chemical compounds and, therefore, the Indian law is in conflict with the non-discrimination principle also provided by TRIPS Article 27. From a policy perspective, Section 3(d) undermines incentives for innovation by preventing patentability for improvements which do not relate to efficacy, for example an invention relating to the improved safety of a product.”

PhRMA also fears the use of patent flexibilities: “Not only is this a concern in the Indian market, but also in other emerging markets that may see India as a model to be emulated”.  Further the submission also expressed concern on the move of the Government of India to issue compulsory licenses through a Ministry of Health Committee on the grounds of national emergency; extreme urgency, and public non-commercial use.

PhRMA terms the lack of data exclusivity in India as a violation of its TRIPS obligation. It submitted: “The Indian Regulatory Authority relies on test data submitted by originators to another country when granting marketing approval to follow-on pharmaceutical products. This indirect reliance results in unfair commercial use prohibited by the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and discourages the development of new medicines that could meet unmet medical needs”.

Consultancy firm Sonecon also represents the IP maximalist viewpoint recently whereby they published a study titled “How India Can Attract More Foreign Direct Investment, Create Jobs, and Increase GDP:
The Benefits of Respecting the Intellectual Property Rights of Foreign Pharmaceutical Producers.” The study argues:  “As the effective application of new technologies has become increasingly important to most nations' economic growth and development, the significance of intellectual property rights has also increased. Most technological innovations come from the world's most advanced countries; and the transfers of those technologies to developing nations, mostly through the foreign direct investments of multinational companies, are critical to efforts to modernize their economies.”  (http://www.sonecon.com/studies.php)

The Confederation of Indian Industry (CII), an advocate of IP protection and enforcement, recently changed their stand on this issue and now recognizes the use of TRIPS flexibility. In a recent statement CII stated: “The Confederation of Indian Industry has pointed out that Global Intellectual Property Centre’s International IP Index 2014 that concluded India as the weakest among 25 countries, does not represent the true picture of India’s IP ecosystem. CII has also expressed concern about the suggestion of designating India Priority Foreign Country, the classification given to foreign countries that "deny adequate and effective" protection of intellectual property rights”. Further, it emphasized that the introduction of Section 3(d) by India is a reasonable decision.” It also stated denial of patents given to Novartis Cancer medicine and the issuance of compulsory license as per the provisions of TRIPS. It also stated “India’s patent laws are fully TRIPS compatible”.

NASSCOM is known for its pro-copyright protection stands. Once its advocacy resulted in the elimination of reverse engineering exception for software under the Indian copyright law. NAASCOM in the past is believed to have obtained resources from software companies like Microsoft and had advocated for strong copyright protection. Therefore, it is curious yet to see the position of NASSCOM on copyright protection in India.

The Indian Pharmaceutical Alliance, an association of Indian companies, opposes a strong IP protection and advocates for the use of TRIPS flexibilities.

Srividaya Raghavan one of the witnessed from academia generally advocates the use of TRIPS flexibilities. In her Special 301 submission she stated “Whatever effect India’s policies may have on the profits on multinational companies, including those headquartered in the U.S., India’s recent enactment and implementation of its patent law is fully in accord with the World Trade Organization’s Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS). Further, India has demonstrated its adherence to TRIPS and to non-protectionism and a national treatment regime by revamping its systems, instituting massive changes to further intellectual property rights and by establishing prudent IP standards that apply equally to both domestic and foreign companies”.

Prof. Sean Flyaan of the American University Law School is also an advocate of TRIPS flexibilities. In his Special 301 submission he stated:  “Under separate cover, two other law professors and I have submitted a note explaining why India’s recent patent reform under Section 3(d) and its compulsory license – including on local working grounds – do not violate TRIPS. Most relevant to this submission – neither of them have been adjudicated to violate TRIPS or any other binding international agreement and therefore any use of them to threaten India with trade sanctions of GSP benefit withdrawals is illegal for the reasons discussed above. Prof. Flynn also questions the legality of Special 301 under the WTO law.

There is one more academic, Arbvind Subramaniam. Even though he worked on IP, of late he works on macro economic and trade issues. In his oral testimony to the Congress Committee on Ways and Means in March 2013 he stated: “American firms are increasingly facing implicit but substantial discrimination in India’s large and growing market because of India signing (or on the verge of signing) free trade and economic partnership agreements with its largest trading partners that are all major competitors to the US”. 

Further, he advocated for the US to adopt a multi-pronged strategy for solving trade conflicts and maximizing the underlying potential. First, “the US should address frictions especially where Indian policies are demonstrably protectionist (as in the case of many local content requirement policies) through multilateral (WTO) dispute settlement procedures.” This testimony was drawn from US India Business Council supported project titled “Deeper Trade Integration between the Democracies”. See: http://waysandmeans.house.gov/uploadedfiles/subramanian_testimony31313.pdf 

MSF, Knowledge Ecology International and Public Citizen are three public interest groups that consistently advocate for the use of TRIPS flexibilities.

One US-based IT multinational said to the author that the pharmaceutical industry associations has hijacked the USITC investigation process and is pushing for strong level IP protection in India, completely ignoring the maneuvering space under the TRIPS Agreement.

Dr. Biswajit Dhar of Research and Information System for Developing Countries (RIS) pointed out that, “The United States uses a slew of measures, including the ‘Make it in America’ Plan to promote use of local products. In a number of major industries, including solar energy and automobiles, US firms have been using local components as a part of the strategy adopted by the Obama Administration to revive the manufacturing sector in the country”. According to him the USITC investigation is a clear case of double standards.

 


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