Setback for India as US places it on priority watch list for IP violations

The Office of the US Trade Representative (USTR) has released the 2022 'Special 301 Report' on Intellectual Property (IP) Protection and Enforcement. The Office of the USTR is the United States government agency responsible for developing and recommending United States trade policy to the President of the US, conducting trade negotiations at bilateral and multilateral levels, and coordinating trade policy within the government through the interagency Trade Policy Staff Committee (TPSC) and Trade Policy Review Group (TPRG). USTR Annual Special 301 Report identifies trade barriers to American companies, primarily due to the IP laws and legislations of other countries. The Special 301 Report is an annual publication dedicated to the global state of IP protection and enforcement. The report labels countries of concern as Priority Watch List or Watch List countries. This year 27 countries received a designation. Designation as a priority watch list country does not come with additional penalties or enforcement, but USTR states that designated countries will be the subject of particularly intense bilateral engagement during the coming year. This year's report is notable in that it contains a separate section dedicated to new Chinese laws on intellectual property protection and USTR's view on their enforcement.

For the Indian pharmaceutical industry, it is once again a big setback as, in the Special 301 report, the US agency has continued to place India on the 'Priority Watch List' along with Russia, China, Indonesia, Argentina, Chile and Venezuela for lacking requisite IPR protection and enforcement. The report highlighted the problematic Section 3(d) of India's patent law, which does not allow for provision of patents for incremental innovation. The report stated that 'in the pharmaceutical sector, the United States continues to monitor the restriction on patent-eligible subject matter in Section 3(d) of the Indian Patents Act and its impacts'. In the report, the US agency expressed its concern that 'pharmaceutical stakeholders also express concerns as to whether India has an effective mechanism for the early resolution of potential pharmaceutical patent disputes, particularly shortcomings in notifying interested parties of marketing approvals for follow-on pharmaceuticals, and view the further restricting in 2019 of transparency of information about manufacturing licenses issued by states as a step backward. Stakeholders also continue to raise concerns as to whether India has an effective system for protecting against the unfair commercial use, and unauthorized disclosure, of undisclosed test or other data generated to obtain marketing approval for pharmaceutical and agricultural chemical products'.

The USTR report highlighted the uncertainty faced by companies in India due to insufficient legal means to protect trade secrets. It says that 'India's 2016 National Intellectual Property Rights Policy, which is past-due for its 5-year review, identified trade secrets as an important area of study for future policy development. However, as of 2022, no civil or criminal laws in India specifically address the protection of trade secrets. While India relies on contract law to provide some trade secret protection, this approach is effective only in situations where the trade secret owner and party accused of misappropriation have a contractual relationship. Criminal penalties are not expressly available for trade secret misappropriation in India, and civil remedies reportedly are difficult to obtain and do not have a deterrent-level effect'. USTR expressed the need for adoption of trade secret legislation in India that comprehensively addresses these concerns.

But it is unfortunate that while finalizing the Report the USTR seems to have conveniently overlooked the substantial and consistent progress made by India on number of issues on which the US companies have for long been raising apprehensions and concerns including that of IP environment in India. In the Report, the USTR itself has admitted that India has made some remarkable progress on the IP front. But, at the behest of the big American pharmaceutical corporations, the US administration chose once again to place India in the Priority Watch List for lacking requisite IPR protection and enforcement. In its Review, the USTR should have taken into consideration the fact that the contentious Section 3(d) of the Indian Patents Act effectively prohibits only secondary patents aimed at increasing the patent monopoly for a drug - the so-called 'evergreening' of patents. In effect, it is an effective way in the Indian context to achieve outcomes similar to that of the Hatch Waxman provisions in the US.

So, the substantial and consistent progress made by India should not have been overlooked by the USTR in its Review this year. It should also have kept in mind that the Indian patent law and its application does not deny adequate and effective protection of IPR; nor does it deny fair and equitable market access to the US pharmaceutical industry which relies on IP protection. The Special 301 process is a unilateral measure taken by the United States under their Trade Act, 1974 to create pressure on countries to increase IPR protection beyond the TRIPS Agreement. It is an extra territorial application of the domestic law of a country and is not tenable under the overall WTO regime.

(The author is freelance journalist with varied experience in different fields)