PROTECTING INTELLECTUAL PROPERTY IN THE DEVELOPING WORLD:
NEXT STOP--THAILAND*

Cortney M. Arnold [FN1]

Abstract

This iBrief examines the U.S. strategy for strengthening the protection of intellectual property rights (IPRs) in Southeast Asia through the use of free trade agreements (FTAs). After briefly examining the U.S. methodology for strengthening IPRs outside the U.S., this iBrief predicts that the intellectual property provisions in the final text of the U.S.-Thailand FTA, which is currently being negotiated, will be very similar to the provisions in previous FTAs that the United States has negotiated with other developing countries.

1. INTRODUCTION

The violation of intellectual property rights (IPRs) is a huge global problem. The World Customs Organization estimates that counterfeiting accounts for six percent of global merchandise trade. [FN2] The World Health Organization reports that approximately ten percent of medicines worldwide are counterfeited, costing the pharmaceutical industry over forty-five billion dollars a year. [FN3] What is more, thirty-nine percent of the software used by companies worldwide qualifies as being pirated. [FN4]

Like many developing nations, Thailand is a source of pirated goods.  [FN5] According to the International Anti-Counterfeiting Coalition, in recent years nearly sixty percent of counterfeit apparel seized by customs authorities in the European Community originated in Thailand. [FN6] Furthermore, Thailand has been designated by the United States Trade Representative (USTR) as a country that needs to improve its intellectual property (IP) protection regime. [FN7]

I. The Evolution of Intellectual Property Rights Protection Outside the U.S.

Since the 1960s, IP protection around the globe has been critical to the developed world, the U.S. included. Developed countries were losing their traditional advantage in the production of manufactured goods, and the only remaining comparative advantage rested in high-tech goods. Because high-tech goods are generally expensive to create but cheap to copy, and because international trade meant that these high-tech goods were sold around the world, countries like the U.S. needed IPRs to be enforced globally. [FN8]

The U.S. first sought to protect IPRs through an international agreement on the trade of counterfeit goods, introduced at the Tokyo Round of negotiations of what later became the World Trade Organization (WTO). However, the agreement was thwarted by a united front of developing countries, and the U.S. was forced to change strategies to accomplish its goals. [FN9] First, the U.S. turned to unilateral pressure to increase IPRs in the developing world through legislation called "Special 301." [FN10] The U.S. later turned its attention to bilateral negotiations resulting in dozens of bilateral investment treaties and FTAs. [FN11]

In order to achieve the desired levels of IP protection in developing nations, the U.S. amended the Trade Act of 1974 to link trade and IP via an instrument known as "Special 301." [FN12] The "Special 301" provisions of the amended Trade Act require the USTR "to identify foreign countries that deny adequate and effective protection of intellectual property rights or fair and equitable market access" for U.S. citizens or entities that rely on IP protection. [FN13] Depending on the extent of deficiency of IP protection, these foreign countries are placed onto either the "Priority Foreign Countries" list, the "Priority Watch List," the "Watch List," or the "Section 306 Monitoring" list. [FN14]

In its 2005 Special 301 Report, the USTR placed fifty-two countries on one of these lists. [FN15] "A 301 investigation may culminate in a bilateral agreement between the [U.S.] and the target state, or failing that, the imposition of trade sanctions by the [U.S.]." [FN16] As a result, bilateral agreements between the U.S. and its trading partners have been increasing since the 1980s. [FN17]

Eventually, the Uruguay Round of WTO negotiations produced an agreement known as the Agreement on the Trade-Related Aspects of Intellectual Property Rights (TRIPS), which requires all WTO members to adhere to minimum standards of IP protection. [FN18] Despite having the TRIPS agreement, the U.S. continues to use bilateral agreements to extend the level of IP protection in developing nations beyond the minimal standards laid out in TRIPS. [FN19]

B. Bilateral Policy: BITs and FTAs

As one of the world's most ardent advocates of stronger protections for IP, "the U.S. has consistently followed a policy of elevating IPRs standards abroad through the use of unilateral, bilateral, and multilateral action." [FN20] Bilateral investment treaties (BITs) and FTAs are part of "a ratcheting process that is seeing IP norms globalize at a remarkable rate." [FN21]

The U.S. is a party to nearly forty BITs. [FN22] A BIT is an agreement between two sovereign nations to establish a stable investment climate within their borders for the investors of the parties to the agreement. While the purpose of a BIT is to protect investment, IP also receives protection as a byproduct. For example, the Mozambique Bilateral Investment Treaty, [FN23] which entered into force in 2005, protects intellectual property as a type of investment. [FN24]

BITs are not the best method for improving IP protection in developing nations for a number of reasons, all relating to their brevity in comparison to FTAs. An FTA is an agreement between two or more sovereign nations to remove all substantial barriers to trade (e.g. tariffs, regulatory requirements) between the nations. First, BITs, while including IP as a type of investment, do not devote an entire article or chapter to IP as FTAs do. Therefore, the protection afforded IP by the treaty is less detailed and also less predictable. Second, the main purpose of BITs is the assurance that foreign investors will be given the same treatment afforded to domestic investors. [FN25] On the other hand, the IP chapters in FTAs seek to completely change the IP regime in the developing signatory State, thus giving foreign IP owners in developing nations more protection than existed in developing countries before the FTA was signed.

[FN1]. J.D. Candidate, 2007, Duke University School of Law; B.S. in Marketing and perations Management,
2003, University of Dayton. The author would like to thank Edward Kelly and Edward Madden of Tilleke & Gibbins International Ltd. (Bangkok, Thailand), Duke Law Professor Jerome Reichman, and DLTR Executive Editor Zia Cromer for their advice in the preparation of this iBrief. All errors and misstatements are the author's alone.

[FN2]. Frederik Balfour, Fakes! The Global Counterfeit Business is Out of Control, Targeting Everything from Computer Chips to Life-Saving Medicines, Bus. Wk. (Asian Edition), Feb. 7, 2005, at 54.

[FN3]. Id.

[FN4]. Alan M. Field, Pirate's Bounty, J. Commerce, May 10, 2004, at 28.

[FN5]. See Larry Jagan, Thailand's Struggle With Goods Piracy, B.B.C. News, Dec. 13, 2001, http://news.bbc.co.uk/1/hi/world/asia-pacific/1709267.stm.

[FN6]. Cortney Arnold and Edward Kelly, Developments in IP: Enforcement in Thailand, Thailand: IP Developments (a publication of Tilleke & Gibbins' Intellectual Property Division), July 2005, at 2 (citing Stacy Baker, The Global Report on Counterfeiting Ch. 5 (About Publishing Group 2005)), http:// www.tillekeandgibbins.com/Publications/pdf/IP_bulletin_july05.pdf.

[FN7]. Office of the United States Trade Representative, 2005 Special 301 Report, Executive Summary, at 1 [hereinafter 2005 Special 301 Report], available at http://www.ustr.gov/assets/Document_Library/Reports_ Publications/2005/2005_Special_301/asset_upload_file948_7645.pdf.

[FN8]. Lecture given by Professor Jerome Reichman at Duke Law School in September 2005. Notes on file with Duke Law and Technology Review.

[FN9]. Forum shifting entails one party shifting negotiations from a forum in which it encounters resistance to a forum where it is likely to achieve its objectives. See Peter Drahos, BITs and BIPs--Bilateralism in Intellectual Property, 4 J. World Intell. Prop. 791, 792 (2001).

[FN10]. See discussion infra para. 6-7.

[FN11]. Further information on these agreements can be found at the USTR Website, http://www.ustr.gov/.

[FN12]. Office of the United States Trade Representative, Background on Special 301, http://www.ustr.gov/assets/Document_Library/Reports_ Publications/2005/2005_Special_301/asset_upload_file223_7646.pdf (last visited Mar. 11, 2006).

[FN13]. Id.

[FN14]. Id.

[FN15]. 2005 Special 301 Report, supra note 7, at 1.

[FN16]. Drahos, supra note 9, at 792.

[FN17]. Id. at 792-93.

[FN18]. Agreement on Trade-Related Aspects of Intellectual Property Rights, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1C, Legal Instruments--Results of the Uruguay Round, 33 I.L.M. 81 (1994) [hereinafter TRIPS], available at http://www.wto.org/english/docs_ e/legal_e/27-trips_01_e.htm.

[FN19]. In the Bipartisan Trade Promotion Authority Act of 2002, Congress stated that "[t]he principal negotiating objectives of the United States regarding trade-related intellectual property are ... to further ... protection of intellectual property rights ... ensuring that the provisions of any multilateral or bilateral trade agreement governing intellectual property rights ... reflect a standard of protection similar to that found in United States law." 19 U.S.C. ง 3802(b)(4)(A) (2000).

[FN20]. Pedro Roffe, Bilateral Agreements and a TRIPS-plus World: The Chile-USA Free Trade Agreement TRIPS Issues Papers (Quaker International Affairs Programme, Ottawa) 2004, at 3, available at http:// geneva.quno.info/pdf/Chile(US)final.pdf.

[FN21]. Drahos, supra note 9, at 798.

[FN22]. The Trade Compliance Center lists these agreements, http:// www.tcc.mac.doc.gov/.

[FN23]. Mozambique Bilateral Investment Treaty, U.S.-Mozam., Dec. 1, 1998, S. Treaty Doc. No. 106-31 (1998).

[FN24]. Id., art. I.

[FN25]. See the first page of the latest model U.S. Bilateral Investment Treaty (completed in 2004), available at http:// www.state.gov/documents/organization/38710.pdf.