First Public Hearing on Special 301: Great first step with room for improvement

UPDATE: A copy of the audio recording of the Special 301 hearing is available on the USTR website at this link: http://www.ustr.gov/about-us/press-office/multimedia (scroll down to "Recent Audio")

The United States Trade Representative (USTR) held a public hearing on Wednesday, as part of its ongoing 2010 Special 301 review process. This year marks the first time that such a hearing was held and that public interest representatives, including myself, were invited to testify. The Trade Act first instituted the Special 301 process in 1988 and authorized the USTR to identify countries that fail to provide “adequate and effective protection of intellectual property rights” or that deny “fair and equitable market access” to U.S. persons who rely on intellectual property (IP) protection. Since then, the process has devolved into a forum for right-holder groups to demand that not only “adequate and effective protection “ for IP but also seek unreasonable expansion of IP rights to the detriment of public interest considerations. The USTR, for its part, seems to have accepted industry demands to a great extent. To make matters worse, there has been minimal public interest participation in this process, thus far. In view of this history, the USTR is to be commended for finally opening up the process and holding a public hearing with robust participation by public interest representatives.

A few themes that came up repeatedly during the hearing and that I thought were significant follow:

What is evidence-based decision making?

In our written submission and in my oral testimony, we repeated the point that USTR should make its decisions to place countries on watch lists only if rights-holders provide adequate evidence justifying such placement. Yet, the Special 301 subcommittee, a panel of officials from various government agencies that will presumably have input in the report, did not seem to appreciate this point. Their take seemed to be that they have to rely on reports submitted to the record of the 301 docket and that the report can only be based on “facts” gleaned from the record.

While that may be true, it does not compel the USTR to blindly rely on assertions made in filings. For instance, the International Intellectual Property Alliance's (IIPA) claims (made in its 2009 filing) that organized criminals in Israel produce and distribute counterfeit goods and that “best-selling medical and technical text-books are leaded loaded on to CD ROMs and …. sold for U.S. $5 or less” in India should not be taken at face value. In response to a question from one member of the Special 301 subcommittee about this issue, Eric Smith of the IIPA said that they have “people on the ground” in various countries who provide them with information based on which they make such assertions. While it may be useful to have “people on the ground,” such anecdotal observations need to be backed up with hard evidence. Unqualified statements cannot be used as justification for subjecting sovereign nations to trade pressures and eroding the United State’s reputation abroad.

The USTR has the ability to request more reliable and substantiated evidence from filing parties The agency could, for example, ask rights holders to provide photographs of these markets, or copies of police reports documenting their complaints against infringing sales. Assuming, for argument's sake, that it is good policy to require these countries to expend greater resources on enforcement, at a minimum, the USTR should possess concrete evidence before subjecting these countries to such pressures.

While the Trade Act does require the USTR to inquire as to what countries deny adequate protection for IP and to place them on watch lists, it does not compel them to place a minimum number of countries on the list every year. And it certainly does not require such placement based on questionable evidence.

Congress mandated the USTR to find countries that deny “adequate and effective protection for intellectual property”

While the USTR did a commendable job in holding a public hearing, it seemed like the importance of public interest participation or its relevance to the Special 301 hearing had not completely sunk in. Members of the Special 301 Subcommittee often repeated Congress' charge to them – to identify countries that deny “adequate and effective protection of intellectual property”. They asked many of the testifying public interest representatives how their testimony helped the USTR fulfill that mandate. Did we have country specific information?

Many of us tried to impress upon the committee that what we were seeking was a new approach to how the USTR interpreted its charge. “Adequate and effective protection of intellectual property” actually means requiring countries to enforce the laws on their books. It does not mean constantly ratcheting up penalties or rolling back limitations and exceptions at the expense of larger societal interests. For example, the USTR could use the framework set out in our submissions to analyze the propriety of allegations that Israel’s fair use exception or India’s exception for “personal and non-commercial use” are “problematic”.

We hope that there will be a shift in USTR’s institutional tendency to think of itself as a protector of the interests of IP holders. In order to truly fulfill its mandate, the agency must learn to view IP as a system of balance between owners and users.

Policies that harm foreign citizens can harm U.S. citizens as well.

Policies that harm the interests of foreign citizens are bad in and of themselves. For example, patent policies that require high levels of protection deny citizens in developing nations access to medicines and should not be promoted in the name of protecting American pharmaceutical companies' interests. However, Special 301’s findings and resultant actions will ultimately harm U.S. citizens as well.

The Special 301 reports are often used as basis for pressuring countries to sign Free Trade Agreements (FTAs) that require further expansion of IP rights and the curtailment of user rights. These agreements bind not only the foreign country, but the United States as well and hold the potential to further upset the balance in U.S. IP law toward large IP holders. Representatives of several state entities, including the Maine State Trade Advisory Commission, the National Legislative Association on Prescription Drug Prices, and the Vermont Commission on International Trade and State Sovereignty, testified that several FTA provisions limit the ability of foreign governments to procure drugs at reasonable prices. They explained that states such as Maine and Vermont currently have programs under which they procure drugs at lower prices, in order to make them available to their citizens. FTA restrictions on state drug procurement threaten not only the ability of foreign governments to implement such programs but domestic programs, such as Maine's and Vermont's, as well.

Though not addressed at the hearing, the implementation of FTAs which further expand on IP rights can also have a more insidious effect. Such agreements gradually solidify international norms to an extent that will prevent Congress from reforming current law in any meaningful way. Thus, the Special 301 and the FTA process will ultimately affect the rights of Americans. This is the reason why ordinary Americans and advocates of balanced IP policy need to pay attention to this somewhat obscure, largely opaque process.

That said, the USTR’s open hearing was a great first step toward a more open, transparent process and should be commended. However, the process certainly could have been even more open than it was and the USTR could do far more to encourage public participation in the Special 301 process. The absence of audio or video conferencing capability in the hearing room prevented public interest representatives from developing countries from testifying. Unlike many Federal agencies' hearings, this hearing was not webcast and the program for the hearing specified that the use of "electronic media" in the hearing room was not allowed. Despite this, many members of the public interest community (including Public Knowledge and KEI) live-Tweeted the proceedings. The USTR has also agreed to make an audio recording of the hearing available online.

While this hearing served as a great first step, we hope that it will be followed by more concrete reforms, of the sort recommended by the public interest community. The USTR is accepting post-hearing comments until March 10. Public Knowledge will file a short set of comments reiterating some of the points we made in our earlier comments and testimony.

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