The federal government just released its Special 301 report, which calls out foreign countries that deprive American companies of billions in revenue — and prevent the creation of countless U.S. jobs — by failing to protect their intellectual property rights.
This year’s report listed the usual suspects: China, India and others. But developed democracies — including European Union members, Mexico, Canada and the United Kingdom — have also explored or enacted policies that undermine U.S. property rights.
As former directors of the U.S. Patent and Trademark Office, we believe it is time to call out the increasingly blatant efforts to undermine intellectual property by our allies — not just our adversaries — and urgently work with these trading partners to reform their ways.
This year’s report is a clear step in the right direction, but far more work remains. Consider how the European Union recently changed legislation to shorten the period that new drugs can remain on the market without competition from copycats, limiting American biotech firms’ ability to earn back the money they spent developing new treatments.
The EU also hasn’t completely abandoned its proposal to allow European bureaucrats to unilaterally set licensing rates for transformative technology behind global wireless communications infrastructure, including 5G, Wi-Fi and other standardized technologies.
By attempting to unilaterally set global licensing rates for these “standard essential patents,” rather than letting private companies negotiate fair rates amongst themselves, the EU would effectively dictate the terms of global trade and undercut American firms.
The government was right to recognize the EU’s increasingly hostile approach to American companies’ intellectual property rights by placing it on the report’s Watch List for the first time in two decades. The United States must continue to flag the problematic nature of the EU’s actions or other countries will use them as precedent and justification for their own policies that are hostile to U.S. intellectual property.
Our Northern and Southern neighbors are also failing us. Mexico doesn’t adequately protect clinical data that companies produce — at great cost — to validate the safety and efficacy of new drugs. And Mexico’s system for resolving patent disputes for purposes of promoting generic competition is ineffective. Its fast-track process avoids proper patent checks, allowing approval of patent-infringing products and violating commitments made under the United States-Mexico-Canada Agreement.
We must work with Mexico to ensure they provide American innovators a level playing field. Keeping it on the Priority Watch List would have helped drive that progress; unfortunately, the government downgraded it to the Watch List.
The federal government once again put Canada on the Watch List for falling short of USMCA commitments. Canada uses its Patented Medicine Prices Review Board to effectively erode the value of American-invented medicines. And its Online Streaming Act disadvantages American digital services providers. If Canada doesn’t end these abuses, it may warrant a placement on future reports’ more serious Priority Watch List.
While the United Kingdom wasn’t included in this year’s report, it deserved a spot on the Watch List. Its courts already purport to have the authority to set global licensing rates that cover U.S. and other nations’ patents. It has also proposed changes to dispute resolution for standard essential patent licensing that would enable the undervaluing of American companies’ innovations — a marked departure from peer nations’ policies on the matter. A Watch List designation could have pushed the United Kingdom to retract those harmful policies and proposals.
China remains one of the most significant violators of Americans’ intellectual property rights, which is why it’s once again on the report’s Priority Watch List.
In some ways, it has taken an even more aggressive approach to intellectual property rights in recent years by implementing seemingly neutral policies that are designed or enforced to disadvantage foreigners. For instance, Chinese courts have increasingly tried to set global standard essential patent licensing rates, often at artificially depressed levels, that help Chinese manufacturers while undervaluing Western inventors.
It’s also taken aim at America’s biotech industry by limiting favorable regulatory treatment to medicines first marketed in China. That approach advantages Chinese biotech companies over their Western competitors and pressures companies to launch first in China, regardless of their assessment of global markets.
Like Mexico, China’s patent linkage system remains flawed. Its current policies don’t provide innovative drug companies with enough time to resolve patent disputes before generic competitors enter the market, giving Chinese generic manufacturers an unfair leg up at the expense of American innovators.
India likewise remains on the Priority Watch List. It’s taken some limited steps to improve intellectual property protections, but far more substantial reforms are necessary. India still limits protections when new innovations improve existing medications and doesn’t have sufficient regulatory data protections. Its patent enforcement mechanisms are still inadequate. And it still tolerates patent litigation delays.
Brazil, with its patent prosecution delays and substantial administrative backlogs that keep innovators from enjoying a full period of patent protection, similarly remained on the Watch List.
This year’s Special 301 report took a meaningful step toward calling out misbehavior of adversaries and allies wherever it occurs. Ultimately, addressing these issues head-on is the first step towards reform.
Andrei Iancu served as the undersecretary of commerce for intellectual property and director of the U.S. Patent and Trademark Office from 2018 to 2021. David Kappos served in the same offices from 2009 to 2013. Both serve as board co-chairs of the Council for Innovation Promotion.
