By, Suhan S

The Special 301 Report[1] is an annual publication by the Office of the United States Trade Representative (USTR) as a statutory requirement under Section 183 of the Trade Act of 1974[2]. The 31st edition of the report was published on 25th April 2019[3]. The report has placed India in the “Priority Watchlist” category again. A country listed on the priority watch list is not subject to sanctions, but is identified as a subject of U.S. concern, and as a possible future target of retaliation or dispute settlement.[4] While the report does not portray a benchmark to assess the position of Intellectual Property laws around the world, it does shed light on the current scenario of Indian IP regime and areas the United States wants India to improve on.

The Special 301 Report calls out India as one of the most challenging major economies for enforcement and protection of Intellectual Property due to narrow patentability standards, costly and time-consuming patent opposition hurdles, long timelines for receiving patents, and excessive reporting requirements.[5] The report cites multiple examples and reasons which compelled the USTR to place India in the “Priority Watchlist” category.

The report states that Section 3(d) of the Indian Patents Act[6] “restricts patent-eligible subject matter in a way that fails to properly incentivize innovation that would lead to the development of improvements with benefits for Indian patients.” However, this provision is to prevent evergreening of patents, which was upheld by the Supreme Court of India in the case Novartis v. Union of India[7].[8]

It holds that the in the agricultural sector, there is a lack of an effective system for protection against unfair commercial use. This could be referring to the recent issue of PepsiCo suing potato farmers in Gujarat for growing FC5 potato variety, which PepsiCo has patented.[9] PepsiCo later withdrew the suit but this caused an international discussion on how effective the rights of a patent holder are against a poor farmer in a country like India.

India has historically maintained that tight regulations will deny it the technology they need to modernize. They maintain the issue is outside the scope of General Agreement on Tariffs and Trade (GATT) and should be dealt with by the World Intellectual Property Organization (WIPO), a UN body mandated to oversee patent and copyright matters.[10] The report states that despite this, India has high customs duties on  IP-intensive products like medical devices, pharmaceuticals, information communications technology (ICT) products, solar energy equipment, and capital goods.

The report quotes two studies from the Organisation for Economic Co-operation and Development (OECD). Its 2019 report titled “Trends in Trade in Counterfeit and Pirated Goods,” finds India among the top five economies for counterfeit goods.[11] Its 2017 report titled “Mapping the Real Routes of Trade in Fake Goods” reveals India to be a key producer and exporter of counterfeit food, perfumes and cosmetics, pharmaceuticals, footwear, textiles, electronics and electrical equipment, toys, games, and sporting equipment. It also found that 55 % of global seizures of counterfeit pharmaceuticals, by total value, originated in India—making it by far the largest producer.[12] These publications are used by the USTR in the Special 301 Report to allege that India’s IP enforcement is inadequate.

The report applauds positive measures taken by India in strengthening the protection of Intellectual Property Rights like India acceding to the WIPO Internet Treaties and the Nice Agreement, the draft Cinematograph Act (Amendment) Bill which criminalizes illicit camcording of films. India following through on resolving burdensome patent reporting requirements by issuing a revised Manual of Patent Office Practice and Procedure that requires patent examiners to look in to the WIPO Centralized Access to Search and Examination system and Digital Access Service to find information filed by patent applicants in other jurisdictions. This should eliminate the need for applicants to file redundant information as per the report. The USTR invites India to join the Singapore Treaty on the Law of Trademarks, which establishes common standards for procedural aspects of trademark registration and licensing.[13]

The Special 301 Report is generally not given much weight by target countries. However, with the current trade war initiated by the US President Donald Trump on counties like China and India, the situation remains unclear. The India-US trade negotiations became hasty when the US withdrew duty-free access to Indian exporters under the Generalised System of Preferences (GSP)[14] and India later retaliated by imposing tariffs on 28 US products.[15] US is known for taking measures such as withdrawal of GSP preferences, humanitarian assistance, military aid, developmental assistance and political support as a form of sanction against developing countries.[16]

The US President also directed the USTR in July 2019 to take necessary action against “rich countries” that claim to be developing countries to avoid World Trade Organization (WTO) rules and enjoy special preferences. Although the move is primarily focused on China, India is also under threat as US has stopped treating her as a developing country.[17] The consistency of the Special 301 process with WTO law is a matter of dispute. If the United States were to impose unilateral sanctions in violation of its WTO commitments – for example, enforcing a tariff greater than permitted in GATT schedules – it would clearly be violating its WTO obligations.[18]

The Special 301 Report is therefore to be considered as an element of US foreign policy in addition to being USA’s stance on protecting the Intellectual Property rights of its domestic interests. India, being put in a position where it has to look out for its home industries which are mostly behindhand and require protection against foreign exploitation, also has to stay on its toes to attract more foreign investments to reach her developmental goals. While safeguarding its own interests, India has to comply with its international IP commitments and should look at more ways to contribute towards creating a worldwide uniform system of granting, protecting and enforcing intellectual property rights. India should set an example for developing and underdeveloped countries to follow.

[1] U.S. TRADE REP., 2019 SPECIAL 301 REPORT (2019), available at https://ustr.gov/sites/default/files/2019_Special_301_Report.pdf

[2] 19 U.S. Code § 2242 (2019).

[3] USTR Releases Annual Special 301 Report on Intellectual Property Protection and Review of Notorious Markets for Piracy and Counterfeiting, (2019), https://ustr.gov/about-us/policy-offices/press-office/press-releases/2019/april/ustr-releases-annual-special-301 (last visited Jul 27, 2019).

[4] Amy Kapczynski, Harmonization and Its Discontents: A Case Study of TRIPS Implementation in India’s Pharmaceutical Sector, 97 California Law Review, Inc.1571–1649 (2009), https://www.jstor.org/stable/20677920 (last visited Jul 28, 2019).

[5] See U.S. TRADE REP., supra.

[6] The Patents Act, 1970, No. 39, Acts of Parliament, 1970 (India).

[7] Novartis v. Union of India, AIR 2013 SC 1311 (India).

[8] Divij Joshi, US Trade Representative Special 301 Report 2019: “Phir Ek Baar, Priority Watch List Ki Vaar” SpicyIP (2019), https://spicyip.com/2019/04/us-trade-representative-special-301-report-2019-phir-ek-baar-priority-watch-list-ki-vaar.html (last visited Jul 27, 2019).

[9] Rishi Iyengar & Swati Gupta, PepsiCo offers to settle with Indian farmers it sued over potatoes for Lays chips CNN (2019), https://edition.cnn.com/2019/04/25/business/pepsico-india-potato-farmer-lawsuit/index.html (last visited Jul 28, 2019).

[10] Louis A. Schapiro, The Role of Intellectual Property Protection and International Competitiveness, 58 ANTITRUST LAW JOURNAL 569–582 (1989), https://www.jstor.org/stable/40841254 (last visited Jul 27, 2019).

[11] OECD/EUIPO (2019). Trends in Trade in Counterfeit and Pirated Goods. Illicit Trade. [online] Paris: OECD Publishing, Paris/European Union Intellectual Property Office. Available at: https://doi.org/10.1787/g2g9f533-en [Accessed 28 Jul. 2019].

[12] OECD/EUIPO (2017). Mapping the Real Routes of Trade in Fake Goods. Illicit Trade. [online] Paris: OECD Publishing, Paris. Available at: https://doi.org/10.1787/9789264278349-en [Accessed 28 Jul. 2019].

[13] Singapore Treaty on the Law of Trademarks art. 3, Mar. 28, 2006, TIAS 09-316.1.

[14] Veronica Stracqualursi & Donna Borak, Trump removes India from special trade status CNN (2019), https://edition.cnn.com/2019/06/01/politics/trump-india-trade-status/index.html (last visited Jul 28, 2019).

[15] India announces retaliatory trade tariffs against the US, BBC News (2019), https://www.bbc.com/news/world-asia-india-48650505 (last visited Jul 28, 2019).

[16] Cf. Chad P. Bown & Bernard M. Hoekman, WTO Dispute Settlement and the Missing Developing Country Cases: Engaging the Private Sector, 8 J. Int’l Econ. L. 861, 866 (2005). The U.S. “Generalized System of Preferences” extends special trade benefits to developing countries.

[17] Asit Ranjan Mishra, Trump targets India and China, asks WTO to tweak developing country livemint (2019), https://www.livemint.com/news/world/trump-targets-india-china-asks-wto-to-tweak-developing-country-status-1564221275578.html (last visited Jul 28, 2019).

[18] Amy Kapczynski, Supra note 4.

Image source: Photo by Naveen Ahmed on Unsplash Available at: https://unsplash.com/photos/9Dt4WutvwDs