A US report offers a stinging rebuke to India’s behaviour on matters of intellectual property. But how justified are its criticisms? Corporate counsel Harish Suryavanshi gives his view

On the eve of World Intellectual Property Day, on 26 April 2019, the Office of the US Trade Representative (USTR) released its annual Special 301 Report for 2019 on US concerns related to intellectual property (IP) rights.

The report lists the markets/countries with which it has the most significant concerns regarding IP rights on its so-called priority watch list, for allegedly engaging in and facilitating substantial copyright piracy and trademark counterfeiting. India is on that list.

The report says the US government has retained India on the watch list for its alleged poor enforcement of IP regulations, and for lack of sufficient measurable improvements to its IP framework on longstanding and new challenges that have negatively affected US rights holders in the past year.

The major IP allegations the report raises against India are:

  1. India is “one of the world’s most challenging major economies” with respect to protection and enforcement of IP;
  2. Poor enforcement of IP regulations in India is impacting US IP rights holders;
  3. India’s pharma industry is one of the largest sources of counterfeit drugs, along with China;
  4. India is to blame for its growing problem of counterfeit medicines posing serious threats to patient health and safety;
  5. India has low transparency on information pertaining to state-issued pharma manufacturing licences and expanding the use of patentability exceptions to refuse pharma patents targeting India’s IP stance on the use of compulsory licensing;
  6. Copyright issues including piracy are mentioned with reference to India. “Restrictive patentability criteria” is cited, along with “a lack of effective protection against unfair commercial use, as well as unauthorized disclosure, of test or other data generated to obtain marketing approval for pharmaceutical and agricultural chemical products”; and
  7. India has inadequate trade secret protection, which puts “US trade secrets at unnecessary risk”, and “negative market access effects” from the EU’s geographical indications (GI) protections.

The report also refers to multilateral (World Trade Organization, or WTO), regional (Asia-Pacific Economic Co-operation forum, or APEC) and bilateral (Trade and Investment Framework Agreements, or TIFA) agreements and specific instances where such agreements are being pursued to advance US trade objectives. It says if progress is not satisfactory by its standards, the US also plans to enforce compliance under section 301 of the US Trade Act, or take recourse using appropriate dispute settlement mechanisms like the WTO.

Answering the report’s concerns

There are certain claims and counter-claims by industry watchdogs in the US and India, especially in relation to IP issues pertaining to pharmaceutical industry.

A routine congressional mandate on release of annual report. The executive summary of the report says it is the result of an annual review of the state of IP protection and enforcement in US trading partners around the world. The office of the USTR conducts the review pursuant to section 182 of the Trade Act of 1974, as amended. Congress amended the Trade Act in 1988 specifically “to provide for the development of an overall strategy to ensure adequate and effective protection of IP rights and fair and equitable market access for US persons that rely on protection of IP rights”.

It further states that, in particular, congress expressed its concern that “the absence of adequate and effective protection of US IP rights, and the denial of equitable market access, seriously impede the ability of the US persons that rely on protection of IP rights to export and operate overseas, thereby harming the economic interests of the US”.

The purpose of the report is aimed at ultimately making India take certain steps that can directly or indirectly benefit the US government and US businesses, particularly in the pharma industry. The language and the tone of complaints year-to-year remain the same, however this year’s report is strongly assertive regarding IP rights and America’s intention to negotiate international agreements and confront its trading partners in ways that protect American innovation and commercial interests first and foremost, regardless of the consequences.

Protectionist and pressure tactics by the US promoting its self-interest. The report is seen more as a pressure tactic and its protectionist tone is in line with its powerful pharmaceutical industry’s demands that call for more stringent IP standards and enforcement in third-world countries, to undermine their competitors.

The USTR clarifies, in its intent to publish this report, to continue to work to protect American innovation and creativity in foreign markets, employing all the tools of US trade policy including the annual Special 301 Report. It emphasizes the areas of continued concern, including counterfeits, online piracy, forced technology transfer, innovative pharmaceutical products and medical devices, and GIs that are affecting America’s commercial interests. The report provides insights into both the concerns of US IP rights holders and the US government’s intentions to work with, or in a way coerce, other countries like India to increase protection for IP rights of US IP rights holders.

The rhetoric and the tone used in the report is to clearly and emphatically convey that the top trade priority for the administration is to use all possible sources of leverage to encourage other countries to open their markets to US exports of goods and services, and provide adequate and effective protection and enforcement of US IP rights. Thus, countries like India once again face unfair pressure from the US government to address their concerns, especially India’s patentability criteria and compulsory licensing criteria, apart from other issues like piracy and counterfeit medicines.

Undermining India’s position as global pharma and affordable medicine hub. The report completely undermines India’s efforts in providing high-quality medicines at low cost to poor and developing countries, with the intent to mar the image of India as a “global pharmaceutical hub” for the health and safety of masses across various world regions, including the African continent. Creating a negative brand image for Indian pharma serves the interest of US pharmaceutical majors in their home market as well.

At a time when medicine prices are soaring, including in the US, the USTR report undermines the efforts of US lawmakers and patient advocates seeking to make medicines more affordable domestically.

India is making generic medicine at quite affordable rates, even as pharma prices are soaring across the globe. The fact that 55% of India’s pharma exports go to highly regulated markets contradicts the argument of the USTR that Indian drugs are low on quality. This clearly indicates that this is the latest in a series of pressure tactics that the US is using to apparently gain more favourable trade terms from India in areas crucial to US commercial interests.

India’s use of compulsory licensing for greater public interest. The use of compulsory licensing has been the most hotly debated area, and one of the greatest concerns, of the US government as reflected in the report. However, India has always used the provision of compulsory licensing judiciously, as it is an exception and flexibility to the general rule of patent in view of the greater public interest.

The concept of compulsory licensing is recognized at both national and international levels, with express mention in the Indian Patent Act, 1970, and the TRIPS (Trade-Related Aspects of Intellectual Property Rights) Agreement. There are certain prerequisite conditions to be fulfilled, if a compulsory licence is to be granted in favour of someone by the Controller General to make, use or sell a particular product, or use a particular process, which has been patented without the need for permission from the patent owner. This exception, however, is subject to conditions laid down under section 84 of the India Patent Act, 1970.

India has the right to use such provisions under the current law to protect its public interest, and the Indian judicial system has judiciously addressed these issues considering the sensitivities, too.

Unwarranted IP concerns raised by USTR. India has been trying to balance the protection and enforcement of IP regulations, and cater to the health and safety needs of the masses, by offering quality and affordable medicines. India has over the years rejected the observations in the Special 301 Report, maintaining that it was a unilateral report of the US government and India was fully compliant with multilateral IP regulations.

India has worked hard to gain flexibility on patent rules in situations involving public health, for instance in the case of patented cancer medicines. Providing some protection to generic drug makers by way of compulsory licensing is important to keep prices under control. While India is taking every step, including implementing the measures under the National IP Policy, to address its counterfeit drug problem, Indian producers of generic drugs have played a great role in achieving critical healthcare outcomes and treating patients across the globe, particularly in developing countries.

Indian officials, too, strongly disagree with the observations made by the USTR, doubt the genesis and methodology of their findings, and view this as opposition to low-cost generics and the thriving Indian drug manufacturing industry, which is the “pharmacy of the world”.

Paradoxical stand on India’s IP regulations and enforcement. The report, while alleging weak IP regulations and weak enforcement, also applauds India for its efforts to address IP challenges, saying that in the past year, India took steps to address IP challenges, and promote IP protection and enforcement. It further says that India’s commitment to bilateral dialogue remains strong, and the US intends to continue to engage with India on IP matters, including through the US-India Trade Policy Forum.

It also mentions the progress made by India in the past year, highlighting that India acceded to the World Intellectual Property Organization (WIPO) Internet Treaties and the Nice Agreement. India also issued revised draft legislation to criminalize illicit camcording, which is awaiting the parliament’s approval.

Strengthen regulation, enforcement

The US Chamber of Commerce’s Global Innovation Policy Centre released its seventh annual International IP Index, which assesses the IP climate in 50 world economies. India moved from 44th ranking in 2018 to 36th in 2019, in recognition of its active steps in international standards of copyright protection and incentives for IP.

The Ministry of Commerce and Industry’s Department of Industrial Policy & Promotion released the National Intellectual Property Rights Policy in May 2016, with the aim not only to protect and promote IP in India, but to focus on the commercial exploitation of IP. India’s patent and drug regulatory laws and policies have helped to protect price-lowering generic competition. It has simplified and streamlined the trademark registration process, and upgraded the IP system to be on par with international standards.

The Indian judiciary has been playing a crucial role in protecting and enforcing matters related to IP infringements, and our judges have been diligently deciding matters on the basis of merit and evidence in view of India’s current IP regime.

Conclusions

India has persistently strengthened its IP regulations to be compliant with international standards, treaties and regulations. The report, with its pressure, in a way violates legal rights and flexibilities created by the TRIPs Agreement, as reaffirmed by the Doha Declaration for WTO members to meet their rights and public health obligations, especially in terms of the compulsory licensing provision in India. India, therefore, shall not submit to US pressure tactics for self-interest against the interests of all people who need access to affordable and quality medicines.

The report shows a unilateral point of view of the US government to protect its self-interest. However, India maintains its stand of operating in accordance with multilateral IP regulations and will continue to take steps for better enforcement.

Harish Suryavanshi is a senior corporate counsel at Tech Mahindra.