Despite Modi’s New IPR Policy, US Continues to Cry Foul Over Indian Laws

As US pharma companies push their interests, India is almost certainly going to be put on the USTR’s ‘Priority Watch List’ for 2017 too.

The Narendra Modi government’s National Intellectual Property Rights (IPR) policy released last May was meant to end the long standing discord between India and the United States on the issue of IPR. However, the prevailing sentiment in Washington is of cautious pessimism. This is evident from the ongoing process of this year’s Special 301 Report – an official admonishment of countries whose IPR framework is seen as an impediment to international trade for US corporations. Basically, it is an annual catalogue of countries that do not meet US IPR norms issued by the United States Trade Representative (USTR).

At the public hearing which forms part of the Special 301 process earlier this month, US trade groups were at it again, rebuking India for its ‘laggard’ IPR regime despite the much awaited National IPR Policy. This year’s hearing was attended as usual, by the largest corporate US lobbies representing the pharmaceutical, software, biotechnology, media, and entertainment sectors. Most of them lauded the new IPR policy as a stepping stone in the direction of improving India’s property rights regime. However, they also expressed cynicism over its translation into concrete policy proposals. As succinctly set forth by the International Intellectual Property Alliance (IIPA) – the largest private sector coalition of trade associations representing the US copyright based industries – the concrete and positive implementation of the policy was the “key metric”.

Building upon this rhetoric, the written submissions of the major trade groups once again appealed to the USTR for India to be designated a ‘Priority Watch List’ country with an Out of Cycle Review (OCR). Since the commencement of the Special 301 process in 1989, except for the years 1991, 1992, and 1993, India has always been designated as a priority watch list country –  mandating the USTR’s urgent attention just falling short of trade sanctions.

The USTR classifies countries into three categories – priority foreign countries (PFC), which is the worst form of classification followed by the priority watch list (PWL) and watch list (WL) countries. A PFC is a statutory category under Section 182 of the Trade Act of 1974. Under this provision, these are countries that have the most onerous or egregious acts, policies or practices that deny adequate and effective IPR or deny fair and equitable market access to US industries and have the greatest adverse impact on US corporate interest. Further, these are countries that fail to enter into good faith negotiations or make significant progress in bilateral or multilateral negotiations to effectively and adequately protect US IPR. PFC countries can possibly attract “retaliation actions” in the form of trade sanctions. The next in line category are the PWL countries, which is a non – statutory category. These are countries that have “serious intellectual property rights deficiencies” but not to the level of a PFC. The last category, which is again a non-statutory category, are the WL countries. These are countries whose IP laws are problematic but not to the extent of a PWL country. Designations under both the PWL and WL categories are resolved by bilateral negotiations, failing which a country’s designation could be ‘upgraded’ to the next level.

The call for India’s designation as a PWL is not surprising considering that year after year, the lobbyists have played the platitudinous trumpet of an unpredictable compulsory license regime, the non-conformity of the patentability criteria under Section 3(d) of the Indian Patent Act, 1970 (the Patents Act) to TRIPS – the trade-related intellectual property rights regime of the World Trade Organisation – the absence of a trade secret and regulatory test data protection regime, backlog of patent and trademark applications and a dilatory patent enforcement process.

In the copyright sphere, the Delhi high court’s landmark decision in the Delhi University photocopy case in 2016, India’s non – adherence to the WIPO Internet Treaties and the high incidence of rampant piracy have been cited by the trade groups representing the copyright based industries. Other grievances pertaining to the guidelines for the examination of Computer Related Inventions (CRI) issued by the Indian Patent Office in 2016 and the amendment of Section 79 of the Information Technology Act, 2000 to provide for safe harbour protection to intermediaries have also been expressed.

Coming to India’s defence were the written testimonies of the Indian Pharmaceutical Association (IPA) and the Federation of Indian Chambers of Commerce (FICCI), which clarified the true import of Section 3(d) of the Patents Act and its due compliance with TRIPS. They also rebutted the concerns of US pharmaceutical trade groups on the ambiguity and unpredictability surrounding India’s compulsory licensing regime by noting that India had to date issued only one compulsory license i.e. on Bayer’s patent on Nexavar, for meeting its public health needs. This was endorsed by Section 84 of the Patents Act which authorises the controller general of patents to grant a compulsory license if the patentee fails to work the invention for public advantage.

Even though Indian lobbyists have defended the country’s IP regime by saying it is in sync with India’s developmental needs and international obligations, such defences remain largely ineffectual. This is because as Professor Peter Drahos aptly states in his book, Information Feudalism, “The Special 301 is a public law devoted to the service of private corporate interests.” This is corroborated by a study conducted by the American University’s Program on Information Justice & Intellectual Property (PJIPA). According to this study, in the 2008 Special 301 Report, 86% of the nations singled out by the IIPA and 75% of the nations singled out by PhRMA – the trade group representing the pharmaceutical companies in the US – were in that year’s Special 301 Report. For the last year, the statistics were even higher as far as the extent of lobbying by PhRMA on the report is concerned: 89.47% of the nations singled out by it have found their way to the 2016 Special 301 report while for IIPA, these statistics stood at 82.35%. In fact, all the grievances expressed by PhRMA and IIPA related to India’s IP regime have been taken into account by the USTR in the 2016 Special 301 report.

Therefore, notwithstanding its new IPR policy, India should once again brace itself to be named by the USTR in the 2017 Special 301 Report due to be released in the end of April.  albeit without paying any deference to it.

Seemantani Sharma is an Intellectual Property Lawyer