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The global protection of intellectual property is a controversial issue that has long divided developed and developing countries. Intellectual property protection is an issue that threatens to stall negotiations to complete the formation of the Free Trade Area of the Americas hemispheric trade pact. The Mercosur countries of Brazil, Argentina, Paraguay and Uruguay are unwilling to agree to increased levels of intellectual property protection in the FTAA beyond that already provided by the TRIPS agreement of the World Trade Organization. TRIPS (Trade Related Aspects of Intellectual Property) resulted from complex multilateral trade negotiations that also produced the General Agreement on Tariffs and Trade and the General Agreement on Trade in Services (GATT and GATS). TRIPS mandates minimum standards of intellectual property protection, but also links retaliation against the import of goods under GATT with violations of TRIPS. Except for Panama, all of the countries included in the FTAA are signatories to TRIPS and are bound to the levels of intellectual property protection required under TRIPS. The current dispute in the FTAA negotiations arises over the desire of developed countries like the United States to increase intellectual property protection beyond TRIPS to the stricter level of the North American Free Trade Agreement. In contrast, the developing countries do not want to commit to protection obligations in the FTAA beyond that of TRIPS. This divide between developed and developing countries reflects the difficulty in balancing private incentives with public benefits that are associated with intellectual property, and is driven by the disparity of wealth and resources between these countries. Developed countries account for the vast majority of intellectual property worldwide and are concerned about the economic effect of piracy on private businesses. Developing countries experience a heavy social cost associated with strong protection, particularly in the area of pharmaceuticals. The economic costs of piracy, including pharmaceuticals and optical media such as CDs, VCDs, DVDs and CD-ROMs to U.S. private interests alone are estimated at $200 billion to $250 billion a year. The losses extend beyond profits. They also include wasted money on fake goods; declines in tax revenues; deterrence from investing; and failure to comply with worker safety standards or product quality and performance. Under the “Special 301″ provisions of the Trade Act of 1974, the U.S. trade representative has identified countries such as Brazil, Argentina and Uruguay for failing to adequately stem piracy of IP. CONFLICTING GOALS Yet, developing countries are concerned with the effect of strong protection on the transfer of technology into their countries as well as their flexibility to set public policy in areas like public health. With regard to pharmaceuticals, a primary concern is consumer access to affordable drug products. These countries experience great social costs stemming from the unavailability of medicines covered by patents of multinational companies due to high prices, which is a major concern during the FTAA negotiations. These concerns arise at least in part from the different policies supporting the grant of intellectual property protection between developed and developing countries. With respect to patents, the United States grants patent rights for the purpose of advancing the technical arts by disclosure of information. In contrast, most developing countries grant patent rights to foster economic development and encourage technology transfer into the country. To reach these different objectives, the patent laws of the developing countries impose different requirements on patent holders than does the United States. These differences exhibit some of the difficulties in balancing private and public interests with respect to protection. For example, the developing countries require that a patented item be manufactured or “worked” in that country as a means to promote technology transfer. If a patent holder does not locally “work” a patented item, the government can issue a “compulsory license” to someone who is permitted to manufacture the patented item. The license holder typically pays a government-set royalty to the patent holder, which is almost always lower than a freely negotiated royalty rate. In fact, governments of developing countries often issue “compulsory licenses” where private negotiations have failed. In contrast, the United States rarely allows for a “compulsory license” except to the federal government. Developing countries resisted linking intellectual property protection to trade talks during the negotiations that led to TRIPS but ultimately agreed as a trade-off for concessions in other areas. The reluctance of developing countries to now extend protection in the FTAA beyond TRIPS stems, in part, from concern that access to medicines for endemic public health crises, such as HIV/AIDS, will be negatively affected by stronger intellectual property protection. In addition, these governments are being pressured by their own domestic pharmaceutical industries for protections against North American demands for more stringent intellectual property rules. Several governments also have expressed concern over implementation costs of TRIPS mandates. Developed countries expect increased levels of commitment from trading partners, including intellectual property protection, above and beyond existing commitments. They demand that in exchange for increased levels of access to their markets. But developing countries need to maintain flexibility in setting their own internal policies to encourage technology transfer and economic development. Most importantly, such flexibility is needed to address social issues stemming from public health crises, without the risk of trade retaliation for intellectual property violations. These basic questions regarding the proper role of global protection and its attendant benefits remain disputed, in part due to different legal principles and public policies of different countries. Unfortunately, the failure to resolve these issues may well derail the timely completion of the FTAA agreement. Nancy J. Flint is an attorney at Hunton & Williams (www.hunton.com) in Miami. She focuses on the acquisition and enforcement of intellectual property rights, including patents, trade secrets, trademarks and copyright, both in the United States and around the world. She’s also an adjunct law professor at the University of Miami law school, where she teaches patent law.

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