Prof. Frederick M. AbbottFlorida State University College of Law

ICTSD Roundtable on Cross-Retaliation in TRIPS and GATS:  Options for Developing Countries

October 17, 2008Geneva

Focusing on Practical AspectsFor many developing countries, cross-

retaliation in TRIPS the only viable option for “inducing compliance”

From a legal standpoint, the criteria for justifying cross-retaliation in TRIPS should not be a substantial obstacle – see Ecuador and Antigua arbitrator approvals

The most significant obstacle to cross-retaliation is political – that is, the diplomatic and media pressure induced by IP-dependent interest groups

Problems Generally Associated with IP CharacteristicsIssues of Valuation

Valuing IP “assets” distinct from problem of determining economic impact of changes to IP rules

IP assets routinely valued in connection with financial market assessments, mergers and acquisitions, securitization E.g., valuation of pharmaceutical patent portfolios and

securitization of revenue streams from copyrighted worksIP rights are “private” in the sense of being owned

or held by persons, as compared with “trading” interests, such as expectations concerning tariff rates

Complex exhaustion of rights issues are present across fields of IPRs

Nationality of right holders must be ascertained

Problems Generally Associated with IP CharacteristicsCourts not typically receptive to claims of

regulatory interference with trading interests, such as raising of tariff rates

Suspension of private IP rights may present issues associated with “takings” that may be anticipated and addressed There are ample means to structure suspension of IP

rights in ways that should not be construed as regulatory takings Limited duration Permit IP holder use of subject matter Suspend less than all rights to exclude Assess against royalty stream, potentially at less than

100% Limit number of third party users Temporary suspension of enforcement Provision for reinstatement

Impact of Extra-WTO AgreementsWIPO Conventions typically authorize ICJ dispute

settlement, but claim of independent violation of WIPO Conventions unlikely to succeedThe state parties to WIPO Conventions expressly

accepted cross-retaliation in WTO agreements establishing an estoppel against seeking to repudiate that acceptance

Principle of good faith performance of treaty obligations should preclude using alternative forum to nullify obligations

WIPO Copyright Treaty and WIPO Performances and Phonograms Treaty do not provide independent basis because, inter alia, permit lawful acts by governments

Impact of Extra-WTO AgreementsBilateral and regional FTAs present different

sets of surmountable legal issuesMay incorporate “TRIPS-plus” provisionsMay define IP as property subject to investor-

state third party arbitrationIf suspension authorized by WTO DSB this

should address potential issue of illegal takingIf suspension carried out avoiding TRIPS-plus

commitments potential for independent breach should be eliminated

Domestic Implementing RulesSuspending Member may (or may not) require

new legislation to authorize suspensionUsing existing legislative mechanisms such as

compulsory licensing/government use provisions may permit expedited and effective actionDepends on case-by-case assessment of national

legislationGovernments should consider including in their

general trade authority the possibility to suspend IP rights based on WTO DSB authorization

CopyrightDifferentiated methods of distribution present

options for partial suspensionsDigital distribution presents opportunities and

challengesOpportunities for effective metering of useChallenges associated with enforcing through

digital rights management (DRM) and technological protection measures (TPMs)

Government may need to overcome TPMs to “access” content - voluntarily or non-voluntary mechanisms

Collection societies may function as intermediaries

PatentMay provide most accessible means of suspension

Government may use existing compulsory license and/or government use legislation, with remuneration adjusted to reflect suspension

Patent holders required to have disclosed invention so as to permit practice by third parties

In pharmaceutical arena, valuation of differential between patented and generic products well understood

Off-patent (generic) pharmaceuticals may be available from exporting countries

Government public health procurement agency may be buyer

Addresses important social issueEffectively “induces” home country of patent holders

TrademarkBecause trademark identifiers used by

consumers to determine quality or characteristics of goods, suspension of trademarks may pose problems for consumers

Governments may in theory monitor quality assurance by authorized third parties, but entails surveillance costs

If consumers are accustomed to “counterfeit market” problems may be less evident

Because of large investment in trademark promotion may nonetheless be effective tool for “inducing compliance”

Geographical indication

Raises issues similar to trademark with respect to consumer association

May depend upon extent to which prior market penetration/consumer association with GIs

May be strong compliance inducement tool

Industrial designPotential attractive candidate for suspension

because designs can be copied without using specific producer identifier, such as trademark (e.g., unauthorized and authorized clothing products share market)

Suspension must take into account the specific national mechanisms of protection that vary widely

Undisclosed informationClassical trade secret protection not well suited to

suspensionInformation by definition closely held. Removing

protection does not place in public view. Also, disclosed trade secrets may not be “put back in box”

Article 39.3 regulatory data protection prime candidate for suspensionAllows facilitated registration of generic drugsShould be adopted alongside pharmaceutical patent

suspensionProvides public welfare benefitMay require legislation for Members that have

elected to adopt “marketing exclusivity” approach not mandated by Article 39.3

Plant variety protection, Integrated circuit layout design protectionSuspension of plant variety protection

(breeder’s rights) also strong candidate for suspension because permits planting of otherwise protected seeds, potential exercise of broadened farmer’s privileges, with positive local economic benefit

Suspension of IC layout design protection unlikely to benefit most developing countries because of significant capital intensity of industry and potential limitations on export of production

ExportsDSU does not expressly address potential

export of IP-suspended productsParallel IP protection may be present in

foreign marketsExhaustion issue based on “consent” or

“lawfully placed on market”Value of exports taken into account in

determining level of suspensionTransaction costs may favor focus on

domestic market

Key Messages

TRIPS cross-retaliation requires planning as to forms of IP, methods of distribution, implementing legislation and domestic public policy

Suspension should be structured as regulatory intervention for a specific purpose - inducing compliance with WTO legal ruling

The country’s Chief Executive should be briefed in anticipation of counter public relations campaign so as to avoid surprise - forewarning will allow a “measured response”