Ever since China's accession to the WTO in 2001, the country has been bound by the high intellectual property protection standards
of the TRIPS agreement. While the Chinese government has undertaken serious efforts to improve patent protection, numerous
problems persist. Inadequate enforcement of intellectual property rights, as well as an inability of the Chinese government
to control widespread production and distribution of counterfeit pharmaceuticals, continue to create a difficult operating
environment for biopharmaceutical companies. The innovative pharmaceutical industry loses an estimated 10 to 15 percent of
its annual revenue in China to counterfeit products. Counterfeit pharmaceutical products are easily available in highly public
areas, underlining the scope of the problem.7 Due to these problems, the US government continues to closely monitor China's IPR practices.
The beginning of 2005 and the recent passage of a new patent law have marked a significant step forward in the area of patents
for biopharmaceutical products in India. While patents were not previously available for medicines, the TRIPS agreement required
India to provide such protection by January 1, 2005. Pursuant to this requirement, the president of India issued a Patents
Amendment Ordinance on December 26, 2004. The ordinance requires patents to be granted on new medicines as of January 1, 2005,
as well as on medicines for which companies filed a patent application after 1995. This is in accordance with the "mailbox
system" envisioned by the TRIPS negotiations. While India and other developing countries have been permitted to delay implementation
of the standards under the TRIPS agreement until 2005, they have been required to establish a mailbox system to receive patent
applications filed since 1995. India is now required to "open the mailbox" and grant patents for approximately 9,000 applications
filed in the last decade. The 20-year term for patent protection will be counted from the submission date of an application,
although a product is not protected until a patent is granted. Companies manufacturing generic versions of drugs that now
receive patents will not, therefore, be responsible for infringement retroactively, but must cease production once the patent
is granted.8 The ordinance was ratified by the Indian parliament on March 23, 2005. The passage of this law is expected to have a significant
impact on India's $5 billion pharmaceutical industry, one of the world's biggest producers of generic drugs.
Additional recent improvements in India have involved reforms that streamline the nation's patent-application process, in
particular the area of pre-grant opposition, timings, and deadlines. In addition, patents are not strictly limited to new
chemical entities; secondary uses are also patentable. Recent patent legislation has not yet provided for an effective period
of data exclusivity as required by Article 39 of the TRIPS agreement, although the issue is under discussion.
US TOOLS FOR ADDRESSING LACK OF PATENT PROTECTION ABROAD
The US government has various tools at its disposal to encourage intellectual property protection worldwide. One of the most
effective of these, the so-called annual "Special 301" review, was mandated by Congress in the 1988 Trade Act. Under the review,
the USTR identifies countries that deny adequate protection or market access for intellectual property rights.9 In this publication, individual countries are warned that the US has concerns about their standard of intellectual property
right protection. Investors are put on notice that their rights may not be adequately protected in that country.10 Listing a country in the report is often a first step toward improved intellectual property right protection and enforcement.
Once a list of countries has been identified for the report, USTR must decide whether to designate any of the nations as "Priority
Foreign Countries." This designation is reserved for those countries with the most onerous or egregious acts, policies, and
practices with the greatest adverse impact on relevant US products, and those that are not engaged in good-faith negotiations
or are not making significant progress in addressing these problems.
Another important tool used by the US government, beyond including intellectual property rights (IPR) in bilateral negotiations
and trade agreements as outlined earlier, are preferential tariff-benefit treatments, such as the Generalized System of Preferences,
the Caribbean Basin Initiative, and the Andean Trade Preferences Act. These programs provide tariff-free treatment to certain
products from eligible beneficiary countries. Tariff-free treatment under all programs is contingent on adequate and effective
intellectual property protection, and the threat of losing the benefits of these programs provides valuable leverage to the
US government in advocating for better IPR protection with its trading partners.11