US Trade Rep Retreats from Defending American Intellectual Property Rights Abroad

At a time when Congress and US law enforcement agencies are increasingly worried about foreign theft of American intellectual property (IP), President Biden’s trade representative is retreating from the fight to defend America’s IP rights abroad.

That’s the main takeaway from the 2024 Special 301 Report released on April 25th by the United States Trade Representative (USTR). The annual document surveys whether US trade partners are providing “adequate and effective” protection of IP rights, including patents, for US entities and persons that rely on IP protection and enforcement globally. 

One of the main concerns, in this regard, is foreign governments’ abuse of compulsory licenses to override patents on US technology. For years, Republican and Democratic administrations alike have criticized compulsory licensing abuses in the Special 301 Report. However, last year’s report said nothing about such abuses, and this year’s report practically encourages them.

In a press release announcing the 2024 Report, United States Trade Representative (USTR) Katherine Tai stated that “the Biden-Harris Administration has continued its policy of declining to call out countries for exercising TRIPS flexibilities, including with respect to compulsory licenses, in a manner consistent with TRIPS obligations.”

This statement is a gaslight. 

The World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) includes “flexibilities” which provide some leeway for governments “to determine the appropriate method of implementing” their obligations “within their own legal system.” Some WTO members interpret such flexibilities as a way to circumvent fundamental obligations, including as it concerns compulsory licensing, by which a government forces a patent holder to share its idea with a competitor in exchange for a royalty. However, compulsory licensing is as a “limited exception” to patent rights under certain narrowly defined conditions designed to protect the legitimate interests of the patent owner.

TRIPS sets out specific requirements for using compulsory licenses, including first seeking authorization from the patent holder. Intended to be a measure of last resort, compulsory licenses often are ineffective in advancing governments’ public health objectives. For example, in 2022, the WTO agreed to the so-called “TRIPS waiver,” which relaxed some requirements regarding compulsory licensing COVID vaccines. However, not a single country used the waiver, and WTO members declined to expand its scope to include COVID diagnostics and therapeutics this past February.

What USTR Ambassador Tai is saying in her statement is that the United States will not challenge countries that provide for compulsory licensing in their domestic legal systems, so long as they comply with their TRIPS obligations. What the 2024 Report makes clear, by way of contrast, is that the Biden administration has turned a blind eye even to compulsory licensing that runs afoul of WTO rules.

Let’s start with the abuses of compulsory licenses.

The 2024 Report eliminates language making clear that compulsory licenses are vehicles of last resort, and never an appropriate tool for industrial policy goals or pricing negotiations. The document also wipes away any mention of compulsory licensing concerns with key trading partners. Even when stakeholders raised concerns that Malaysia considered using products secured through compulsory licenses to promote medical tourism, or that Indonesia was leveraging compulsory licenses despite the existence of voluntary license agreements in market, the 2024 Report does not reference these concerns. 

The document even removes references raised in previous Reports regarding “India’s continued use of the threat of compulsory licensing to coerce right holders to lower pharmaceutical prices,” and the need for Chile, in order to main the integrity of IP systems, to “use compulsory licenses only in extremely limited circumstances and after making every effort to obtain authorization from the patent owner….” 

Making matters worse, the 2024 Report walks back longstanding US support for voluntary licenses over compulsory ones. Last year’s report said that the US “encourages” voluntary licenses “on mutually agreed terms.” This year’s report simply says “[t]he United States recognizes the role of voluntary licenses as one mechanism to promote greater access to pandemic response products.”

This about-face is deeply troubling. Voluntary licenses, as the UK explained to the WTO, were the key to scaling up the transfer of COVID technologies to developing countries during the pandemic. Biden’s reversal is intended to put the spotlight back on compulsory licenses to appease far left Democrats who believe that removing IP from trade deals will help regulate “Big Pharma” in the United States. It won’t. It will just distract developing countries from taking meaningful steps to prepare for the next pandemic.

The 2024 Report is also disappointing because of what it doesn’t say.

First, it’s mum on the benefits of IP to the US economy. The 2024 Report deleted the 2023 Report’s second paragraph, in which USTR noted that innovative industries have directly or indirectly created 63 million high-paying jobs and account for 41% of US gross domestic product.

Second, despite the fact that USTR instructed the International Trade Commission (ITC) to study the pros and cons of expanding the TRIPS waiver, the only lesson drawn from this in the 2024 Report is that “the price of medicines can be untenably high for some countries.” Perhaps, but the conclusion to draw from the study is that this is because of poverty, not patents, which the ITC recognized are critical to enabling medical innovation in the first place. This point should have been front and center in a document that’s supposed to be about protecting and enforcing America’s IP.

Third, the 2024 Report makes no mention of the fact that many developing countries want TRIPS waivers on green technologies to further their industrial policy pursuits. The African Group, which comprises 44 members, submitted a proposal to the WTO insisting on more “policy space” to “reindustrialize strategic sectors,” including by watering down IP protections. The irony, of course, is that most developing countries do not have any TRIPS obligations until 2034, if ever. But again, in a document that’s supposed to address IP challenges, the Biden administration should have pushed back against this waiver frenzy to protect against state-sponsored theft by the likes of India and South Africa.

Words matter. The 2024 Report is unhelpful because of what it says, and negligent for not saying more. America’s innovative industries deserve better than the Biden administration’s retreat from safeguarding their ideas in foreign markets.