[Ip-health] IUT: IPR Groups Blast Chile For FTA Violations; Hatch Calls For Dispute Settlement

Peter Maybarduk pmaybarduk at citizen.org
Wed Feb 29 15:20:26 PST 2012

Inside U.S. Trade - 02/24/2012

IPR Groups Blast Chile For FTA Violations; Hatch Calls For Dispute Settlement

Posted: February 23, 2012

U.S. business groups with an interest in protecting intellectual property rights (IPR) this month said Chile has still not complied in full with certain IPR obligations under the U.S.-Chile free trade agreement despite recent efforts by the government to bring itself into compliance.

Citing the same failures, Senate Finance Committee Ranking Member Orrin Hatch (R-UT) last week urged U.S. Trade Representative Ron Kirk to initiate dispute settlement proceedings with Chile over its non-compliance with the FTA's IPR obligations.

Additionally, business groups argued in comments to the Office of the U.S. Trade Representative that Chile should remain on USTR's 2012 Priority Watch List of major IPR violators.
In particular, the Pharmaceutical Research and Manufacturers of America (PhRMA) said Chile must enact further changes to its laws to bring itself in line with FTA obligations to provide effective tools for patent owners to challenge the approval of allegedly infringing generic pharmaceuticals, and to protect data used to test the safety and efficacy of drugs from use by generic companies.

These two issues have been a bone of contention between the U.S. and Chile since the FTA went into effect in 2004, and USTR previously pressed Chile for progress on them at an Aug. 2 meeting of the U.S.-Chile Free Trade Commission (Inside U.S. Trade, Aug. 26).

On copyrights, the International Intellectual Property Alliance (IIPA) said Chile is still failing to comply with its FTA obligation to create an effective system to hold Internet service providers (ISPs) liable for IPR-infringing material posted by users, an issue known as secondary liability.

In addition, IIPA said Chile also "continues to ignore" its FTA obligation to provide adequate legal protection for so-called Technological Protection Measures (TPMs), or "digital locks," which are used to protect against unauthorized access to a copyrighted work.

In a Feb. 16 letter to Kirk, Hatch said he appreciates USTR's efforts to amicably negotiate a settlement of these IPR issues with Chile, but remains worried that, "absent the threat of formal dispute settlement and potential sanctions, the Chilean government may lack the will and ability to adequately address the outstanding issues relating to intellectual property rights."

Hatch also attacked USTR's failure to launch a formal dispute settlement process with Chile even though it has done so with Guatemala over that country's alleged violations of the labor chapter of the Central American Free Trade Agreement.

"These contrasting approaches raise serious questions as to how USTR prioritizes its limited trade enforcement resources," Hatch said. He added that Chile's "flagrant violations" of U.S. IPR pose a serious harm to U.S. businesses, in contrast to Guatemala's internal labor policies, which may be an "important issue" but whose impact on U.S. businesses is marginal at best.

As a result, Hatch requested from Kirk a "clear accounting of the criteria your office uses in determining whether to initiate consultations and formal dispute settlement proceedings under the terms of our trade agreements, including an analysis of how that criteria is being applied in the cases of Guatemala and Chile."

In its comments, PhRMA welcomed the Chilean government's intention to submit new legislation to the country's Congress aimed bringing it closer in line with its FTA obligation to provide an effective system that would enable patent owners to challenge expeditiously the approval of allegedly infringing generic pharmaceuticals. However, PhRMA stressed that the final legislation needs to provide three key protections for patent holders.

According to PhRMA, the legislation must provide sufficient time prior to the granting of sanitary registration for a generic to determine whether there is infringement of an existing patent; ensure that the patent holder has access to the courts to assert its patent rights prior to the grant of a sanitary registration for a potentially infringing generic; and not contain burdensome additional requirements for companies wishing to enforce their patent rights, such as posting an excessively large bond.

If these conditions are met in final legislation approved by Chile's Congress, PhRMA said it would support an "out-of-cycle review" of Chile's Special 301 status for a possible upgrade. In his letter, Hatch said the draft legislation falls "far short" of Chile's FTA obligations, but did not elaborate.

On the issue of test data protection, PhRMA said changes the Chilean government enacted by decree in December 2010 corrected "several deficiencies" in Chile's current system.

But it argued that additional changes to Chile's Industrial Property Law are needed to address several remaining weaknesses, including the fact that the current system does not allow protection of test data for new uses of a previously approved chemical entity.

PhRMA noted that the Chilean government is currently working on a reform of Chile's Industrial Property Law, but said it is unclear whether the reform will address the brand-name drug industry's request for changes to the test data protection system.

On secondary liability, IIPA said amendments to Chile's copyright law that went into effect in May 2010 are inadequate because they fail to establish a notice and takedown procedure like the one required by the FTA that would govern the removal by internet service providers (ISPs) of infringing material posted by users.

By contrast, the amended law only creates a "notice and notice" system whereby ISPs inform subscribers of notification from rights holders about allegedly infringing content. Under this system, "failure to comply on the part of the ISP or failure to remove content on the part of the user results in no negative consequences," according to IIPA.
IIPA generally supports the U.S. "notice and takedown" system, which requires an ISP given notice of allegedly infringing content to take down that content or face liability if a lawsuit is filed. Under U.S. law, takedowns can be countered by the subscriber and there are "safe harbors" for certain types of service providers.

IIPA also opposes the Chilean law as amended because it requires that ISPs have "effective knowledge" before voluntarily removing infringing content, and says this knowledge must be based on a notification by a court of law rather than the right holder. IIPA said this structure severely limits voluntary cooperation between ISPs and rights holders to remove infringing material.

The association also argued that the law fails ensure that ISPs comply with the notification requirement through any incentives or penalties.

IIPA cited a number of other problems with the amended copyright law, including overbroad exceptions and low minimum criminal sentences, and also pointed to shortcomings in copyright enforcement in Chile.

More information about the Ip-health mailing list