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Defending Intellectual PropertyRights in the BRIC EconomiesRobert C. Birdn

I. INTRODUCTION

Protecting intellectual property rights in Brazil, Russia, India, and China,

collectively known as the BRIC economies, has become an important pol-

icy focus of the U.S. government. These important emerging economies

have not yet fully developed intellectual property protection and enforce-

ment mechanisms. In all four countries, intellectual property infringement

ranges from rampant to merely widespread. Nonetheless, U.S. firms can-

not afford to ignore the market opportunities in these rapidly growing

nations. This presents an obvious quandaryFhow can U.S. companiesremain competitive in the BRIC economies while still protecting their in-

tellectual property rights? This article will investigate possible answers to

this question.

This question holds particular importance in light of a 2003 study

titled Dreaming with BRICs: The Path to 2050, published by Goldman

Sachs.1 This paper examined growth projections of the BRIC economies

from the present date to 2050 relative to long-term projections of the G6

r Academy of Legal Studies in Business 2006

317

American Business Law JournalVolume 43, Issue 2, 317363, Summer 2006

nAssistant Professor, University of Connecticut. I would like to thank Subhash Jain and theUniversity of Connecticuts Center for International Business Education and Research forfunding to support the completion of this article. My thanks are given for the comments andsupport of the attendees of the BRIC Conference held at the University of Connecticut inApril 2005. I appreciate comments and support from Dan Cahoy and Leigh Anenson. Igratefully acknowledge research assistance from Christophe Pane and Anne Taylor. An earlierversion of this article is forthcoming in a chapter of a book edited by Subhash Jain. All errorsand omissions are my own.

1Dominic Wilson & Roopa Purushothaman, Dreaming with BRICs: The Path to 2050 (GoldmanSachs, Global Economics Paper No. 99, 2003), available at http://www.gs.com/insight/research/reports/99.pdf.

countries.2 The authors applied demographic trends to projections of cap-

ital accumulation and productivity growth to make their predictions. The

results were startling. In less than forty years, the BRIC economies col-

lectively will be larger than the G6.3 Indias economy is projected to be

larger than all nations except the United States and China in as little as

thirty years.4 China may overtake Germany in economic size within four

years, Japan within ten years, and the United States within thirty-five

years.5 India is expected to grow at the rate of five percent per year for the

next thirty years.6 By 2050, only the United States and Japan may be left of

the current six largest economies in the world.7

It is reasonable to conclude that over the next forty years the BRIC

economies will increasingly influence the worlds political, economic, and

military balance of power. Also, the rise of BRIC power will have significant

implications for the international business legal environment. Yet few legal

scholarly articles discuss the BRIC economies collectively as an emerging

economic force.8 This article focuses on one important legal aspect of

BRICs economic growthFthe international protection of intellectualproperty rights.9 The lack of intellectual property rights protection ranks

2Id. at 3. The G6 was the G8s immediate predecessor. Members of the G6 are generallyviewed as the United States, Japan, Germany, France, Italy, and the United Kingdom. Formore information on the G8, which includes the G6 plus Canada and Russia, see Profile: G8,http://news.bbc.co.uk/1/hi/world/americas/country_profiles/3777557.stm;G8 Information Centre,http://www.g7.utoronto.ca/.

3Wilson & Purushothaman, supra note 1, at 4.

4Id.

5Id.

6Id.

7Id. at 4.

8Exceptions to this rule are, for example, Michael Littlewood, Tax Competition: Harmful toWhom?, 26 MICH. J. INTL L. 411, 478 n.278 (2004) and Srividhya Ragavan, The Jekyll and HydeStory of International Trade: The Supreme Court in Phrma v. Walsh and the TRIPS Agreement, 38 U.RICH. L. REV. 777, 824 n.279 (2004).

9This article examines intellectual property protections in all four BRIC countries, but placesextra emphasis on the Chinese economy. The Chinese economy absorbs the most investmentfrom the United States, is studied the most out of the four economies, and has received thegreatest attention from the United States regarding intellectual property rights enforcement.As the Chinese economy appears to be the most advanced of the four, discussions of intel-lectual property in China will be relevant to the other BRICs as Brazil, Russia, and Indiafollow Chinas economic path.

318 Vol. 43 / American Business Law Journal

for many firms as the single most significant threat to their international

competitiveness.10

This article is divided into five parts. Part II examines the efforts of

the United States to establish intellectual property as a trade issue,

develop an international intellectual property regime, and enforce rights

of U.S. firms abroad. It also examines the use of the TRIPS enforcement

regime and Special Section 301 by the United States to pressure the BRIC

countries to adopt higher standards of intellectual property protections.

Part III further explores the effectiveness of coercion in protecting U.S.

intellectual property rights abroad. This part discusses U.S. reliance on

sanction-based measures and the long-term effect of these measures on

protecting intellectual property rights. Two coercion-response models are

examined: the China Cycle of Coercion and the India Cycle of

Coercion. The first model reflects a retaliation-response and the the sec-

ond model reflects a delayed-response reaction to U.S. coercion. This

part concludes that while coercion is sometimes necessary, it is not an

ideal strategy to sustain the long-term protection of intellectual property

rights.

Part IVof this article examines the efficacy of unilateral initiatives as a

component of a national intellectual property protection strategy. Unilat-

eral initiatives are defined as measures presented to a recipient without an

immediate expectation of reciprocation. This part shows that unilateral

initiatives are an effective part of any negotiating strategy to improve

intellectual property rights internationally. This article concludes that

unilateral initiatives have been given insufficient attention in intellectual

property rights strategies and should become a part of any measure to

protect such rights in the BRIC economies.

II. THE RISE OF THE INTERNATIONAL INTELLECTUALPROPERTY REGIME AND THE U.S. STRATEGY OFCOERCION

During the eighteenth and nineteenth centuries inventors desiring patents

would be required to simultaneously submit patent applications in all the

10Ilkka A. Ronkainen & Jose-Luis Guerrero-Cusumano, Correlates of Intellectual PropertyViolation, 9 MULTINATL BUS. REV. 59, 59 (2001).

2006 / Defending Intellectual Property Rights in the BRIC Economies 319

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countries where the inventor wanted patent protection.11 Failure to do so

resulted in nullifying patent protection for all except one of the nations to

which the patent was submitted on the grounds that the first application

destroyed the novelty of subsequent applications.12 The lack of global

protection became so acute that inventors refused to attend an interna-

tional exhibition of inventions in Vienna in 1873 for fear of losing their

patent rights.13

The lack of international protection of intellectual property rights

remained the norm until the passage of the 1883 Paris Convention for the

Protection of Industrial Property14 and the 1886 Berne Convention for

the Protection of Literary and Artistic Works.15 Among other things, these

conventions established the principle of national treatment.16 The national

treatment principle requires nations to grant foreign patent holders the

same rights given its own citizens. These agreements also required signa-

tories to impose minimum standards of intellectual property protection.

Revised and amended extensively over time, these conventions remain the

foundation of international intellectual property law.17

Unfortunately, the Paris and Berne Conventions have failed to ade-

quately limit the global piracy of intellectual property. Nations retain broad

discretion in granting intellectual property protections despite being

11Gerald J. Mossinghoff, National Obligations Under Intellectual Property Treaties: The Beginning ofa True International Regime, 9 FED. CIR. B.J. 591, 593 (2000).

12Id.

13Id. at 59495 (citing Warren S . Wolfeld, Note, International Patent Cooperation: The Next Step,16 CORNELL INTL L. REV. 229 (1983)).

14Paris Convention for the Protection of Industrial Property, July 14. 1967, 21 U.S.T. 1583,T.I.A.S. No. 6295, 828 U.N.T.S. 305 [hereinafter Paris Convention]. Belgium, Brazil, France,Guatemala, Italy, the Netherlands, Portugal, Salvador, Servia, Spain, and Switzerland were theoriginal signatories to the Paris Convention. Gregory W. Hotaling, Ideal Standard v. IHT: In theEuropean Union, Must A Company Surrender its National Trademark Rights When it Assigns itsTrademark?, 19 FORDHAM INTL L.J. 1178, 1240 n.365 (1996).

15Berne Convention for the Protection of Literary and Artistic Works, Sept. 9, 1886, revised atParis July 24, 1971, 25 U.S.T. 1341, 828 U.N.T.S. 221 [hereinafter Berne Convention].

16Frank Emmert, Intellectual Property in the Uruguay RoundFNegotiating Strategies of the WesternIndustrialized Countries, 11 MICH. J. INTL L. 1317, 1337 (1990).

17Id. See also Jason Taketa, Note, The Future of Business Method Software Patents in the IntellectualProperty System, 75 S. CAL. L. REV. 943, 958 (2002).


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signatories to these conventions.18 Entire fields of patentable technology,

such as pharmaceuticals, biotechnology, and agricultural chemicals, have

been excluded from protection.19 Copyrightable documents such as edu-

cational materials have also been excluded.20 The duration of patent

protection, at times, was so limited as to be only minimally effective in

protecting such rights.21 Some countries limited patentability to the proc-

ess alone and not the end product.22 The result was an international legal

environment that failed to protect the most basic of intellectual property

rights. Limited intellectual property rights protection and the lack of any

real harmonization led to complaints about the effectiveness of the Paris

and Berne Conventions.23

The failures of global intellectual property protection rose to prom-

inence in the United States during the 1980s, when executives became

concerned with the decline of American competitiveness in manufactur-

ing.24 The rise of technologically focused industries also gave intellectual

property enhanced importance.25 The time had come for American busi-

nesses to use their economic and political power to encourage other

nations to respect intellectual property rights.

American businesses began in earnest to reshape the modern global

intellectual property regime during the early phases of the Uruguay

Round of the General Agreement on Tariffs and Trade (GATT), negoti-

ated between 1986 and 1994. The proposed agenda for this round of

negotiations was similar to topics discussed in the past: the improvement

of trade in the textiles and apparel, services, agriculture, foreign direct

18Emmert, supra note 16, at 1340. See also Andrew T. Guzman, International Trust and the WTO:The Lesson From Intellectual Property, 43 VA. J. INTL L. 933, 948 (2003).

19Emmert, supra note 16, at 1340.

20Id.

21Id.

22Id.

23Guzman, supra note 18, at 94849.

24Peter M. Gerhart, Reflections: Beyond Compliance TheoryFTRIPS as a Substantive Issue, 32 CASEW. RES. J. INTL L. 357, 367 (2000).

25Id.; Kenneth W. Dam, The Growing Importance of International Protection of Intellectual Property,21 THE INTL LAWYER 627, 629 (1987). See generallyRalph Oman, Intellectual PropertyFOur Onceand Future Strength, 27 GEO. WASH. J. INTL L. & ECON. 301 (199394).


investment, and government procurement.26 Both developed and devel-

oping countries had much to gain from the negotiations. Developing

countries wanted to liberalize trade in textiles and apparel products.27

Developed countries hoped to liberalize service and foreign direct invest-

ment requirements.28 Despite attempts by American businesses, intellec-

tual property rights, although a significant global issue by the mid-1980s,

was not part of the GATTagenda. The United States sought support from

their European and Japanese allies to make intellectual property a trade

issue.29 The inadequacy of intellectual property protection in the areas of

patents, copyrights, and trademarks facilitated the emergence of common

interests among disparate companies and organizations.30 The Pharma-

ceutical Manufacturers Association (PMA) promoted intellectual property

protection as a trade issue in its testimony before Congress.31 The Inter-

national Intellectual Property Alliance (IIPA), an organization dedicated to

policing national copyright protection efforts, also played a major role in

changing the GATT agenda.32 Large multinational corporations formed

a cross-industry organization called the Intellectual Property Committee

(IPC), representing companies like Merck, Johnson & Johnson, IBM,

Hewlett Packard, General Motors, General Electric, Monsanto Chemical,

and Warner Communications.33 All of these groups sought to place intel-

lectual property rights at the top of the international trade agenda.

26Mossinghoff, supra note 11, at 598.

27Id.

28Id.

29Susan K. Sell, Multinational Corporations as Agents of Change: The Globalization of IntellectualProperty Rights, in PRIVATE AUTHORITY AND INTERNATIONAL AFFAIRS 169, 18384 (A.C. Cutleret al. eds., 1999).

30Mohamed Omar Gad, Impact of Multinational Enterprises on Multilateral Rulemaking: The Phar-maceutical Industry and the TRIPS Uruguay Round Negotiations, 9 L. & BUS. REV. AM. 667, 674(2003).

31Id. at 675.

32Id. at 674 n.32.

33Michael Perelman, In Patents we Trust, htttp://www.ipfrontline.com/depts/article.asp?id=6687&deptid=6. Perelman quotes Edmund J. Pratt, Chairman Emeritus of Pfizer, as statingthat:

In 1983, Pfizer joined with other corporations such as Merck, Johnson & Johnson, Bris-tol-Myers, IBM, Hewlett Packard, General Motors, General Electric, Rockwell Interna-


In 1987, a vice president of IBM argued to Congress [that] intellec-

tual property has become a trade problem . . . because . . . [like] other trade

issues . . . nations often put domestic priorities first and only later under-

stand that [such actions] . . . seriously erode their own international trade

interests.34 The IPC noted that inadequate international protection of

intellectual property has become a major cause of distortions in the inter-

national trading system . . . and that it is both appropriate and necessary for

intellectual property issues to be dealt with under international trade rules

. . .35 These groups targeted developing countries for special scrutiny.36

Developing countries, led by BRIC nations of India and Brazil, re-

sisted American efforts to link trade and intellectual property rights under

GATT in order to improve intellectual property protections.37 They ar-

gued that discussion of intellectual property rights exceeded GATTs orig-

inal mandate.38 They further responded that developing nations were able

to achieve their current development levels in part because they were not

restricted by intellectual property rules.39 If developing countries accepted

strong intellectual property restrictions, they argued, there would be less

of an opportunity to catch up to more advanced nations and the gap

tional, Du Pont, Monsanto, and Warner Communications to form the Intellectual Prop-erty Committee to advocate intellectual property protection. The committee helpedconvince U.S. officials that we should take a tough stance on intellectual property issues,and that led to trade-related intellectual property rights being included on the GATTagenda when negotiations began in Punta del Este, Uruguay, in 1986.

Id.

34Dam, supra note 25, at 630.

35Gad, supra note 30, at 676.

36For example, the President of the PMA testified before Congress that, [a]ll [developingcountries] have significant deficiencies in intellectual property protection for pharmaceuticals,the correction of which would substantially improve the market share for U.S. pharmaceuticalcompanies. Id. at 675. For a useful summary of the PMAs position during this era, see GeraldJ. Mossinghoff, Research-Based Pharmaceutical Companies: The Need for Improved Patent ProtectionWorldwide, 2 J. L. & TECH. 307 (1987). Gerald Mossinghoff was the President of the PMA at thetime of the publication of this article. Id. at n.aa1.

37Gerhart, supra note 24, at 369 n.30.

38Elizabeth Chien-Hale, Asserting U.S. Intellectual Property Rights in China: Expansion of Extra-territorial Jurisdiction?, 44 J. COPYRIGHT SOCY U.S.A. 198, 226 (1997).

39Id.


between rich and poor would continue to expand.40 The developing

countries considered the World Intellectual Property Organization

(WIPO) to be the appropriate forum.41 Developing countries, which make

up more than half of the WIPO membership, could effectively block any

changes to intellectual property standards.42 With a strong local manufac-

turing industry of generic drugs and other products, India initially refused

to even discuss the possibility of including patent protection in any GATT

agreement.43 By 1989, most of Indias allies had succumbed to U.S. threats

of trade sanctions. India grudgingly accepted intellectual property rights

improvement as a trade issue44 and allowed it to be placed on the GATT

agenda.45

The subsequent negotiations led to the adoption in 1994 of the

Agreement on Trade-Related Aspects of Intellectual Property Rights

(TRIPS).46 This agreement provided broader protections for intellectual

property rights by granting most favored nation treatment for all signa-

tories, establishing minimum terms of protection, imposing significant

40Id.

41Lee Petherbridge, Intelligent TRIPS Implementation: A Strategy for Countries on the Cusp ofDevelopment, 25 U. PA. J. INTL ECON. L. 1133, 1135 n.11 (2004).

42Id.

43Debate on this issue continued until 1989, three years after the Uruguay GATT Round ofnegotiations began. C. ONeal Taylor, Linkage and Rule-Making: Observations on Trade and In-vestment and Trade and Labor, 19 U. PA. J. INTL ECON. L. 639, 668 n.114 (1998).

44George K. Foster, Opposing Forces in a Revolution in International Patent Protection: The U.S. andIndia in the Uruguay Round and its Aftermath, 3 UCLA J. INTL & FOREIGN AFF. 283, 315 (1998).

45Id.

46Agreement on Trade-Related Aspects of Intellectual Property Rights, Apr. 15, 1994, Mar-rakesh Agreement Establishing the World Trade Organization, Annex 1C, LEGAL INSTRUMENTSFRESULTS OF THE URUGUAY ROUND vol. 31, 33 I.L.M. 81 (1994). [hereinafter TRIPS]. See alsoDonald P. Harris, TRIPS Rebound: An Historical Analysis of How the TRIPS Agreement can Ric-ochet Back Against the United States, 25 NW. J. INTL L. & BUS. 99 (2004) (discussing TRIPS). TheTRIPS agreement, which implements sweeping protections to intellectual property rights ona global scale, has been hailed as the most important international law governing intellectualproperty rights. Susan K. Sell, What Role for Humanitarian Intellectual Property? The Global-ization of Intellectual Property Rights, 6 MINN. J.L. SCI & TECH. 191, 191 (2004). See also Xuan-Thao N. Nguyen, Nationalizing Trademarks: A New International Trademark Jurisprudence?, 39WAKE FOREST L. REV. 729, 761 (2004) (similar); Martin J. Adelman & Sonia Baldia, PatentableInventions: Prospects of Limits of the Patent Provision in the TRIPS Agreement: The Case of India, 29VAND. J. TRANSNATL L. 507, 512 (1996) (The importance of TRIPS cannot be easily over-emphasized.).


local enforcement and dispute settlement requirements, and authorizing

trade sanctions against noncompliant nations.47 This landmark agree-

ment48 was due, at least partially, by the concerted effort of U.S.-based

companies.49

At the same time, American multinational interests advocated for ad-

ditional domestic legislation to coerce developing countries into adopting

more intellectual property protections. U.S. law already had in place

Section 30150 of the Trade Act of 197451 which contains significant meas-

ures to ensure trade compliance and fair competition. Section 301 power

arose from Congressional dissatisfaction with the lack of protection U.S.

trade was receiving under the then-current GATT regime.52 Section

301 grants the President broad authority to impose sanctions against a

47For one of many useful articles summarizing TRIPS see Robert J. Gutowski, Comment, TheMarriage of Intellectual Property and International Trade in the TRIPS Agreement: Strange Bedfellowsor a Match Made in Heaven?, 47 BUFF. L. REV. 713 (1999).

48One commentator states that TRIPS was without question the grandest event in commer-cial diplomatic history, Foster, supra note 44, at 283 (citing ERNEST H. PREEG, TRADERS IN ABRAVE NEW WORLD: THE URUGUAY ROUND AND THE FUTURE OF THE INTERNATIONAL TRADINGSYSTEM xi (1995)).

49TRIPS would have been unthinkable without the concerted efforts of U.S.-based corporateexecutives. Sell, supra note 29, at 170.

5019 U.S.C. 2411 (2005).

51The stated purposes of the 1974 Trade Act are:

(1) to foster the economic growth of and full employment in the United States and tostrengthen economic relations between the United States and foreign countries throughopen and nondiscriminatory world trade;(2) to harmonize, reduce, and eliminate barriers to trade on a basis which assures sub-stantially equivalent competitive opportunities for the commerce of the United States;(3) to establish fairness and equity in international trading relations, including reform ofthe General Agreement on Tariffs and Trade;(4) to provide adequate procedures to safeguard American industry and labor against un-fair or injurious import competition, and to assist industries, firm, workers, and commu-nities to adjust to changes in international trade flows;(5) to open up market opportunities for United States commerce in nonmarket economies;and(6) to provide fair and reasonable access to products of less developed countries in theUnited States market.

19 U.S.C. 2102 (2005).

52Kim Newby, The Effectiveness of Special 301 in Creating Long Term Copyright Protection for U.S.Companies Overseas, 21 SYRACUSE J. INTL L. & COM. 29, 33 (1995). The congressional SenateReport reviewing the act stated:


priority foreign country53 that engages in unfair trade practices.54 Sec-

tion 301(a) authorizes retaliation against a nation that has breached a trade

agreement with the United States.55 Section 301(b) authorizes retaliation

against a nation that has taken actions which burden[] or restrict[] United

States commerce.56 In response to calls for additional measures, Congress

amended Section 30157 by adding Super 301 and Special 301. Super 30158

requires the United States Trade Representative (USTR) to review U.S.

trade priorities and to determine the foreign country practices that

pose major barriers to U.S. exports.59 Special 301, by contrast, focuses

In addition, the Committee felt that there would be situations, such as in the case ofunreasonable foreign import restrictions where the President ought to be able to act orthreaten to act under section 301, whether or not such action would be entirely consist-ent with the General Agreement on Tariffs and Trade. Many GATTarticles, such as Ar-ticle I (MFN principle) Article III (taxes affecting imports), Article XII (balance ofpayments safeguards), or Article XXIV (regional trade associations) are either inappro-priate in todays economic world or are being observed more often in the breach, to thedetriment of the United States. Furthermore, the decision-making process under theGeneral Agreement often frustrates the ability of the United States (as well as othercontracting parties) to obtain the decisions needed to enable the United States to protectits rights and benefits under the GATT. . . .

The Committee is not urging that the United States undertake wanton or recklessretaliatory action under section 301 in total disdain of applicable international agree-ments. However, the Committee felt it was necessary to make it clear that the Presidentcould act to protect U.S. economic interests whether or not such action was consistentwith the articles of an outmoded international agreement initiated by the Executive 25years ago and never approved by the Congress.

S. REP. NO. 1298, 93d Cong., 2d Sess. (1974), reprinted in 1974 U.S.C.C.A.N. 7186, 7304.

53The process of identifying of a priority foreign country is codified at 19 U.S.C. 2242 (2005).

54See Peter K. Yu, From Pirates to Partners: Protecting Intellectual Property in China in the Twenty-First Century, 50 AM. U. L. REV. 131, 139 n.37 (2000).

5519 U.S.C. 2411(a)(1)(A) (2005).

5619 U.S.C. 2411(a)(1)(B)(ii) (2005).

57Omnibus Trade and Competitiveness Act of 1988, 19 U.S.C. 21012495 (2005).

58Section 301 has been characterized as probably the most criticized piece of U.S. foreigntrade legislation since the Hawley-Smoot Tariff Act of 1930. Yu, supra note 54, at 139 n.39(quoting Robert E. Hudec, Thinking About the New Section 301: Beyond Good and Evil, inAGGRESSIVE UNILATERALISM: AMERICAS 301 TRADE POLICY AND THE WORLD TRADING SYSTEM 49,113 ( Jagdish Bhagwati & Hugh T. Patrick eds., 1990)).

59Yu, supra note 54, at 139.


specifically on unfair intellectual property rights practices.60 Special 301

requires the USTR61 to identify nations that provide weak intellectual

property protection or deny U.S. intellectual property goods fair or equi-

table market access.62

The United States has not hesitated to use its newly augmented trade

enforcement powers against the BRIC countries. For example, in 1987

PMA filed a petition with the USTR claiming Brazils denial of patent pro-

tection for pharmaceutical products and processes adversely affected its

member companies by harming their patent rights, eroding their Brazilian

investments, threatening their exports to Brazil, and eliminating oppor-

tunities for further investment and trade in the Brazilian economy.63 The

PMA estimated past and potential losses for its members in the hundreds

of millions of dollars.64 The petition served as a signal that nations that

failed to provide adequate intellectual property protections to American

exporters would face the new sanctions provided under Special 301.65 As a

result, Brazil was one of the first nations to suffer direct sanctions under

60Id. at 13940.

61Newby, supra note 52, at 34. The OTCA removed retaliation and investigation powers fromthe President and placed them with the United States Trade Representative.

62Yu, supra note 54, at 140. The amended trade law also places strict time limits on how longbefore the USTR must act against a country that has been cited as an offender against U.S.trade interests. Jared R. Silverman, Multilateral Resolution Over Unilateral Retaliation: Adjudi-cating the use of Section 301 Before the WTO, 17 U. PA. J. INTL ECON. L. 233, 246 (1996) (citing 19U.S.C. 241213 (1988)). Upon such identification, the USTR must initiate an investigationwithin thirty days and request a consultation regarding that nations improper practices. Yu,supra note 54, at 140. If the issue is not resolved to the USTRs satisfaction within six monthsfor most issues, the USTR is authorized to suspend or withdraw trade benefits and imposeduties or other penalties. Id.


64Id.

65PMA characterized Brazil as a leader of developing countries whose purpose was to diluteeven the most basic minimum standards provided by the Paris Convention. Id. at 684. Gadquotes a statement by Gerald J. Mossinghoff, then President of the PMA, as stating:

Brazil is a leader of the so-called G-77 countries effort to reduce the already minimumstandards for patent protection in the Paris Convention. It has also opposed efforts toinclude intellectual property protection within the purview of the GATT as a trade-re-lated issue. As a newly industrialized nation, it is time for Brazil, the eighth largest econ-omy in the west, to start playing by the rules of the international trading system.

Statement of Gerald J. Mossinghoff, President, PMA, in BrazilFPharaceutical Patents, USTRPublic Docket No. 30161.


Special 301. On October 20, 1988, President Reagan issued proclamation

5885, increasing U.S. import duties on certain Brazilian products by one

hundred percent.66 The PMA commented that [w]e hope the imposition

of this sanction, which is modest in comparison to the revenue losses sus-

tained by our industry in Brazil, will impress upon Brazil the seriousness

with which the United States views the unauthorized appropriation of its

citizens intellectual property.67 The sanctions impacted $200 million in

trade.68 One year later, the Brazilian government announced that it would

seek improved patent protection legislation for pharmaceutical products

and processes.69

Russia was also pressured by the United States to improve its intel-

lectual property regime, albeit on a more limited scale. The USTR placed

Russia on its Watch List in 1995 and then on its Priority Watch List in

1997,70 signifying its noncompliance with intellectual property stand-

ards.71 Earlier, the U.S. government encouraged the then Soviet Union

to join the Berne Convention in exchange for preferential trade status.72

After the collapse of the Soviet Union, the Russian government assumed

the responsibilities of the agreement.

The United States pressured India to agree to the negotiation of the

TRIPS agreement through its influence over International Monetary Fund

66Increase in the Rates of Duty for Certain Articles from Brazil, Proclamation No. 5885, 53Fed. Reg. 41,551 (Oct. 20, 1988). See also Myles Getlan, TRIPS and the Future of Section 301: AComparative Study in Trade Dispute Resolution, 34 COLUM. J. TRANSATL L. 173, 185 (1995).


68Id. at 684.

69Determination to Terminate Increased Duties on Certain Articles from Brazil, 55 Fed. Reg.27,324 ( July 2, 1990).

70See Lianlian Lin, Intellectual Property Protection in China, 27 ACAD. LEGAL STUD. BUS. NATLPROC. 203, 205 (1998) ([The] USTR prepares a list of countries, ranked from priority foreigncountry, a country with the most egregious IPR problems, to priority watch list, and towatch list, a country that still warrant [sic] monitoring.).

71Connie Neigel, Piracy in Russia and China: A Different U.S. Reaction, 63 LAW & CONTEMP. PROBS.179, 188 (2000). See also Tim Kuik, Piracy in Russia: An Epidemic, 20 WHITTIER L. REV. 831(1999).

72Neigel, supra note 71, at 185. At the same time, the motion picture industry, lobbied the U.S.Congress to withhold ratification of the agreement until the Russians improved their copy-right laws. Lana C. Fleishman, The Empire Strikes Back: The Influence of the United States MotionPicture Industry on Russian Copyright Law, 26 CORNELL INTL L.J. 189, 21522 (1993).


assistance to the 1989 Indian economic crisis.73 The United States exerted

influence because it had provided India with needed direct grants and was

Indias largest trading partner.74 Based upon the cumulative effect of these

economic factors, India abandoned its opposition to TRIPS in order to

maintain badly needed U.S. funding and trade access.75

Finally, U.S. pressure on China almost resulted in a series of trade

wars. During the 1990s the United States repeatedly threatened to impose

sanctions against China for its failure to protect American intellectual prop-

erty rights. China would agree to improve and enforce its intellectual prop-

erty laws and the United States would agree to not impose sanctions.76

Although the United States and the interests that supported it lobbied ag-

gressively to improve intellectual property protections, the result of these

efforts, as the next section will show, were decidedly mixed in nature.

III. COERCION AS AN INEFFECTIVE STRATEGY INPROMOTING INTELLECTUAL PROPERTY PROTECTIONIN THE BRIC COUNTRIES

Coercion, in the context of international relations, occurs when a stronger

nation (S) forces a weaker nation (W) to perform actions that serve the

dominant power.77 The typical coercion scenario involves S stating that it

will punish W if it fails to take a certain action. S maximizes its payoff when

W takes the demanded action. Given Ss statement, W also maximizes its

payoff if it takes the demanded action and is not punished, assuming the

cost of the punishment is greater than the benefit of inaction. The optimal

conditions for both W and S are when W complies with Ss demands

and S does not punish the weaker state.78 This occurs not by raising the

73Foster, supra note 44, at 316.

74Id. at 317.

75Id. at 31617. The Indian government relented even though it was subjected to relentlesslobbying from Indian farmers and drug manufacturers to do otherwise. Id. at 30913.

76See text accompanying notes 14479.

77Jack L. Goldsmith & Eric A. Posner, ATheory of Customary International Law, 66 U. CHI. L. REV.1113, 112324 (1999). This example assumes the cost of punishing the weaker state is neg-ligible.

78Id. See also Edward T. Swaine, Rational Custom, 52 DUKE L.J. 559, 57678 (2002).


equilibrium benefit of W to follow S but by making the alternative of not

performing Ss demanded action more costly.79

As Part II revealed, all four BRIC economies have endured American

governmental pressure to improve their intellectual property regimes.

Brazil faced overwhelming pharmaceutical industry pressure and govern-

mental threats of sanctions from the U.S. to improve its patent protection

for drug products and processes. Brazil gave up its resistance by discussing

intellectual property rights at GATT, joined the TRIPS agreement, and

now possesses a functioning patent approval system that is fairly consistent

with the minimum standards of protection required by TRIPS.80

The Russian government was faced with the choice of improving its

intellectual property laws or losing most favored nation trade status with

the United States. In response, it joined the Berne Convention, enacted

intellectual property laws protecting computer programs, databases, and

integrated circuit topologies,81 and adopted a comprehensive copyright

law.82

India faced the prospect of overwhelming trade penalties and aid

losses if it did not reform its intellectual property policies. In spite of strong

political pressure from farmers and domestic generic drug consumers,83

India acceded to TRIPS. India also passed legislation establishing a mail-

box system to receive patent applications, protecting geographic indication

trademarks, and strengthening copyright law.84

Finally, China resisted U.S. efforts to change its domestic piracy prac-

tices, even threatening retaliations. A trade war was averted when China

agreed to U.S. demands and halted some of its domestic acts of piracy.

Today, Chinese intellectual property law resembles developed nations

legal codes. Since Chinas accession to TRIPS, it has extended patent

protection from fifteen to twenty years, protected geographic indication

79Gerhart, supra note 24, at 369.

80See generally Claudia Schulz, The TRIPS Agreement and Intellectual Property in Brazil, 98 AM.SOCY INTL PROC. 100 (2004).

81Neigel, supra note 71, at 186.

82Id. at 185.

83Foster, supra note 44, at 30910.

84Embassy of India Policy Statements, Intellectual Property Rights in India, at http://www.in-dianembassy.org/policy/ipr/ipr_2000.htm.


trademarks, and offered the right of judicial review to administrative

decisions of the Trademark Review and Adjudication Board.85

These changes in BRIC governments intellectual property policies

show that coercive action by the U.S. government has changed the legal

landscape in these nations. All four BRIC countries have developed strong-

er intellectual property laws as a result of American coercion. Successful

enforcement of these new laws, however, is a different matter altogether.

The IIPA86 has given low marks to the enforcement of intellectual property

protections by BRIC countries. For example, government action in

Brazil is nonexistent against illegal copying of academic books and other

85See generally Veronica Weinstein & Dennis Fernandez, Recent Developments in Chinas Intellec-tual Property Laws, 3 CHINESE J. INTL L. 227 (2004).

86International Intellectual Property Alliance (IIPA) a coalition of private-sector interestsformed to represent copyright-based industries in improving copyright protection on a globalscale. See Description of the IIPA, www.iipa.com/aboutiipa.html. The IIPA also influences theUSTRs Section 301 reviews and, among other activities, participates in discussions with theWorld Intellectual Property Organization (WIPO) regarding intellectual property rights. Mostimportantly for purposes of this paper, the IIPA tracks intellectual property regimes and en-forcement in over eighty countries around the world. The IIPAs annual country reports areuseful in understanding the global enforcement of intellectual property rights. Although theIIPA focuses primarily on copyright piracy, their reports offer a uniquely detailed commen-tary that is instructive on the level of intellectual property protection in the BRIC economies.Trademark infringement, for example, is widespread in all four BRICs. One 1995 study ex-amining the trademark protection losses in the footwear and apparel industry estimated thepercentage of lost sales to trademark piracy was 26%, 28%, 28%, and 26% for Brazil, Russia,India, and China, respectively. See The Economic Impact of Trademark Infringement: Esti-mation of the Impact of Trademark Counterfeiting and Infringement on Worldwide Sales ofApparel and Footwear 1314, at http://http://www.inta.org/downloads/tap_economicimpact1998.pdf. In China, stage agencies report 51,851 prosecuted trademark cases in Chinain 2004, a 27% increase in such cases from the prior year. E.g., Trademark Infringement Cases onthe Rise in 2004, 32 P.R.C. BUS. REV. 62, 62 (May/June 2005). Chinese agencies confiscated anddestroyed tons of illegally trademarked material and issued fines totaling $32.4 million. Id.Yet, the USTR has expressed concern that foreign trademark owners do not appear to bereceiving national treatment with regard to their well-known marks. See USTR 2003 Special301 Report 10, at http://www.ustr.gov/assets/Document_Library/Reports_Publications/2003/2003_Special_301_Report/asset_upload_file665_6124.pdf. Brazils National Institute ofIndustrial Property has increased its enforcement efforts to stop trademark piracy. Brazil:Licensing and Intellectual Property, EIV ViewsWire New York, Sep. 1, 2004 (calling trademarkpiracy in Brazil a problem and noting weaknesses in Brazilian trademark law). See generallyJames K. Glassman, Get Tough With Axis of Evil Job Stealers, Det. News, Apr. 12, 2005, at http://lists.essential.org/pipermail/ip-health/2005-April/007764.html (referring to James Pinkertonsclassification of Brazil, India, and China as the IP Axis of Evil due to widespread violation ofU.S. intellectual property rights).


materials.87 Piracy of copyrighted recordings constitutes over half of all

compact disc sales in Brazil.88 Seventy-four percent of all video games sold

in Brazil are pirated.89 While civil actions are being pursued against some

pirates,90 these actions are ineffective because Brazilian disputes take years

to be adjudicated91 and light penalties fail to provide much deterrence.92

Brazilian copyright piracy caused $931.9 million in trade losses in 2004.93

Russian copyright piracy remains one of the most serious of any

country in the world.94 Russia is now one of the largest producers and

distributors of illegal optical media material.95 The majority of audio and

compact disks sold in Russia are pirated copies.96 Crime syndicates thrive

off of the sales of illegal products.97 Enforcement of Russian intellectual

property laws is anemic at best.98 Russian authorities do not conduct sur-

prise inspections, do not seize and confiscate equipment, and rarely repeal

issuances of inappropriate licenses.99 Jail sentences for piracy are rare.100

Russian copyright piracy exceeded $1.7 billion in 2004.101

87International Intellectual Property Alliance, 2005 Special 301 Report: Brazil 51, 56 (2005) avail-able at http://www.iipa.com/rbc/2005/2005SPEC301BRAZIL.pdf [hereinafter Brazil IIPA Report].

88Id. at 54.

89Id. at 55.

90Organized crime in Brazil participates heavily in and benefits significantly from piratingactivities. Id. at 5758.

91Id. at 55.

92Id. at 6162.

93Id. at 53.

94International Intellectual Property Alliance, 2005 Special 301 Report: Russian Federation13, 13 (2005) available at http://www.iipa.com/rbc/2005/2005SPEC301RUSSIA.pdf [hereinaf-ter Russia IIPA Report].

95Id. at 13.

96Id. at 21.

97Id. at 2021.

98Id. at 22.

99Id. at 17.

100Id. at 21.

101Id. at 13.


India, like Russia and Brazil, suffers from both high piracy rates and

a weak enforcement system.102 Legitimate recording industries report

rapidly declining sales of products.103 Eighty-six percent of entertainment

software sold is pirated.104 Illegal booksellers operate openly in market

bazaars with no threat from law enforcement.105 While criminal cases have

been commenced, they proceed at a glacial pace through Indian courts.106

The IIPA has not been able to discern more than 15 criminal convictions

for copyright piracy in 15 years.107 When enforcement does occur, small

fines and short jail terms are common.108 Almost $500 million in trade

losses are attributed to copyright piracy in India in 2004.109

The sheer volume of copyright and trademark piracy in China is

staggering. Piracy levels are at ninety percent across all copyright sec-

tors.110 At least eighty-three manufacturing plants operate in China with

765 production lines that specialize in the manufacture of pirated

goods.111 Although the Supreme Judicial Court of China has recently is-

sued new interpretations of the Chinese Criminal law, it is questionable

whether these new interpretations will make any practical difference in

reducing piracy.112 Chinese copyright piracy amounts to a $2.5 billon

industry in 2004.113

102International Intellectual Property Alliance, 2005 Special 301 Report: Russia 121,121(2005), available at http://www.iipa.com/rbc/2005/2005SPEC301India.pdf [hereinafterIndia IIPA Report].

103Id. at 126.

104Id.

105Id. at 123.

106Id. at 128.

107Id. at 127.

108Id. at 128.

109Id. at 123.

110International Intellectual Property Alliance, 2005 Special 301 Report: China 183, 183,(2005), available at http://www.iipa.com/rbc/2005/2005SPEC301PRCrev.pdf [hereinafterChina IIPA Report].

111Id. at 187.

112Id. at 204.

113Id. at 186.


In sum, despite some good faith government enforcement efforts,114

piracy remains rampant and increasingly prevalent in all four BRIC

countries. The next section will analyze the limitations of coercion as a

tool for meaningful improvement in international intellectual property

protection.

A. The Limitations of Coercion in International Economic Relations

American threats of trade sanctions against the BRIC countries resulted in

significant changes to domestic and international laws. Coercion placed

intellectual property on the GATTagenda in spite of fierce resistance from

developing countries. Threats of a trade war encouraged China to enact

more stringent copyright laws and close pirating factories. Russia im-

proved its copyright laws under threat from the United States to withhold

ratification of a trade agreement granting Russia preferential trade status.

Economic pressure forced India to accede to the intellectual property

standards of TRIPS. American economic threats pressured Brazil to agree

to protect U.S. pharmaceutical products and processes at the expense of

local producers. Coercion, therefore, can accomplish change in global

intellectual property standards.

Coercion as a dominant long-term strategy, however, cannot elimi-

nate intellectual property infringement. Illegal reproduction of protected

goods and works in the BRIC economies remains commonplace. The ex-

pansion of broadband networks and access to technology by BRIC citizens

will only increase the opportunity for pirated products to spread. The de-

mand for illicitly manufactured pharmaceuticals and other patented prod-

ucts remains strong. Although some laws are in place, enforcement

remains lax. Coercion as a dominant U.S. political strategy has failed to

114According to the IIPA, Brazilian, Russian, Indian, and Chinese officials have all engaged inat least some efforts to curb piracy. For example, authorities in Brazil arrested notorious pi-racy leader Law Kim Chong and seized millions of blank optical media. Brazil IIPA Report,supra note 87, at 5758. Brazilian authorities alleged that Chong attempted to bribe theChairman of Brazils Congressional Anti-Piracy Committee. Id. at 57. Brazilian and Indianauthorities have raided large plants specializing in piracy of optical media. Russia IIPA Report,supra note 94, at 17; India IIPA Report, supra note 102, at 127. The Chinese government ismaking headway in reducing print journal piracy and bringing successful civil cases underrecent Copyright Act amendments. China IIPA Report, supra note 110, at 193, 202. Russianauthorities conducted a series of raids against optical disc plants and seized illegal materials.Russia IIPA Report, supra note 94, at 1718.


significantly curb global intellectual property piracy.115 In fact, evidence

demonstrates that unilateral economic sanctions by the United States

regularly achieve their stated long-term policy objectives.116 One author

who studied twenty international crises between 1905 and 1971 concluded

that if our results suggest anything, it is that an assertive, bullying, strat-

egy is both less effective and more risky than much of the folklore of power

policies would have it.117

There are six reasons why coercive tactics against foreign states fail to

achieve their long-term policy objectives and potentially harm U.S. inter-

ests. The first and probably the most obvious reason that coercion fails is

because it provokes retaliation by the targeted state.118 For example, when

the United States threatened to impose sanctions against China because of

its lack of protection for intellectual property, China responded by trans-

ferring an airplane purchase order worth $1.5 billion from a United States

company to a European competitor.119 China and the United States have

participated in a continuous cycle of threats of sanctions, followed by ne-

gotiations, and resolutions.120 China has proved that it is willing to threat-

en countersanctions when it feels its sovereignty or national dignity

has been threatened by American demands for increased intellectual prop-

erty enforcement.121

Second, economic sanctions that benefit one U.S. industry can cause

damage to another unrelated U.S. industry. For example, drug companies

in the 1980s cited Brazil for its failure to provide intellectual property

115E.g., Yu, supra note 54, at 172 (discussing China and concluding that [a]part from thelukewarm responses it was able to elicit, the coercive American foreign intellectualproperty policy failed to create any sustainable and continuous protection for Americanproducts.).

116Justin D. Stalls, Economic Sanctions, 11 U. MIAMI INTL & COMP. L. REV. 115, 148 (2003) (citingvarious sources and concluding that, [n]early all scholarly analyses conclude that economicsanctions are generally unsuccessful.).

117Russell J. Leng & Hugh G. Wheeler, Influence Strategies, Success, and War, 23 J. CONFLICTRESOL. 655, 681 (1979).

118Yu, supra note 54, at 16667 (citing ADAM SMITH, THE WEALTH OF NATIONS bk. I, ch. 8, at 434(Edwin Cannan ed., 1937) (1776)).

119Id. at 168.

120See text accompanying notes 14579.



rights for patents in the pharmaceutical sector.122 After continued nego-

tiations between Brazilian and U.S. representatives proved unfruitful, the

United States imposed economic sanctions against numerous Brazilian

products, including paper products, pharmaceuticals, chemicals, micro-

wave ovens, television cameras, telephone answering machines, tape

recorders, moccasins, pistols, and jewelry.123 Once the government an-

nounced the trade sanctions, General Electric protested the tariffs against

imported electrical breakers, Xerox opposed the inclusion of copy paper,

Dow Chemical objected to the tariffs on carbon tetrachloride, Ford Motor

called for the removal of amplifiers and windshield wipers, and Carrier

sought the removal of air conditioners from the tariffs target list.124 Each of

these companies claimed that the sanctions harmed their economic inter-

ests because they relied on the importation of the targeted products to

satisfy consumer needs.125

Third, economic coercion isolates the coercive country from its trad-

ing partners.126 Trading partners who witness American coercion applied

against another country will naturally reflect on when such sanctions

will be applied against them.127 As a result, noncoerced trading partners

will be less likely to trust the United States to maintain harmonious

122Getlan, supra note 66, at 185.

123Id. at 188.

124Christopher Scott Harrison, Comment, Protection of Pharmaceuticals as a Foreign Policy: TheCanada-U.S. Trade Agreement and Bill C-22 Versus the North American Free Trade Agreement, 26N.C. J. INTL L. & COM. REG. 457, 484 n.144 (2001). See also Getlan, supra note 66, at 189 n.90;Administration Opens Hearings on Proposed Sanctions in Brazilian Pharmaceuticals Case, 5 INTLTRADE REP. (BNA) 1247, 1247 (1988).

125Harrison, supra note 124, at 484 n.144. See also Sanctions Hurt U.S. Hong Kong Firms Morethan China, Executives Say, 9 INTL TRADE REP. 56, 5657 (1992) (noting that manufacturers andimporters of appliances, electronic goods, magnets, and antibiotics objected to the use of pu-nitive tariffs as a means of punishing China because the decreases in sales as a result of higherprices would lead to the loss of 39,000 jobs.).

126Peter K. Yu, Toward a Nonzero-Sum Approach to Resolving Global Intellectual Property Disputes:What we can Learn from Mediators, Business Strategists, and International Relations Theorists, 70 U.CIN. L. REV. 569, 579 (2002).

127David Hartridge & Arvind Subramanian, Intellectual Property Rights: The Issues in GATT, 22VAND. J. TRANSNATL L. 893, 909 (1989) (It is indeed hard to see why many states shouldaccept new multilateral commitments in [the intellectual property] area if they remain vul-nerable to unilateral actions.).


relationships.128 Liberal use of coercive sanctions in the past will make forg-

ing trade agreements with future partners more difficult, thereby decreas-

ing the competitiveness of U.S. firms relative to their foreign competition.

Fourth, sanctions help mobilize resistance against and generate hos-

tility toward the sanctioning state. For example, in 1996, Congress passed

the controversial Cuban Liberty and Democratic Solidarity Act of 1996,

popularly known as the Helms-Burton Act, which punished foreign na-

tionals and foreign companies that do business with Cuba.129 While the Act

was intended to destabilize the Cuban government, the act actually weak-

ened internal opposition to Fidel Castros regime. According to a United

Nations report, Helms-Burton strengthened support for Castro in Cuba

because the Act gave the appearance that outsiders, rather than

Cubans, would decide the nations future.130 The legislatures of the

European Union, Mexico, and Canada passed retaliatory legislation

banning companies operating in their countries from obeying the

Helms-Burton Act.131

In 1992 the United States successfully pressured the International

Whaling Commission to send back for further study a scientific report that

recommended the reinstitution of limited commercial whaling based upon

the presence of large and increasing whale stocks.132 The effect was to

extend the moratorium on commercial whaling for another year.133 In

response, commercial whaling nations aggressively reasserted their rights

128David T. Shapiro, Note, Be Careful What You Wish for: U.S. Politics and the Future of the NationalSecurity Exception to the GATT, 31 GEO. WASH. J. INTL L. & ECON. 97, 114 (1997) (Unilateralsanctions also hurt U.S. interests by undermining the stability of the international tradingsystem upon which businesses rely. Foreign countries or companies contemplating a long-term commercial relationship with a U.S. exporter must consider the possibility that U.S.foreign policy considerations may interfere.).

12922 U.S.C. 60216091 (2005). See also Shapiro, supra note 128, at 99.

130Shapiro, supra note 128, at 114 (citing U.S. Anti-Cuba Law Seen Sapping Domestic PoliticalOpposition, AGENCE FRANCE-PRESSE, Mar. 13, 1997, available at 1997 WL 2076602).

131Digna B. French, Economic Sanctions Imposed by the United States Against Cuba: The Thirty-NineYear Old Embargo Culminating with the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of1996, 7 U. MIAMI INTL & COMP. L. REV. 1, 13 (1999).

132ABRAM CHAYES & ANTONIA HANDLER CHAYES, THE NEW SOVEREIGNTY: COMPLIANCE WITH INTER-NATIONAL REGULATORY AGREEMENTS 10102 (1995).

133Id. See generally Alma Soongi Beck, Comment, The Makahs Decision to Reinstate Whaling:When Conservationists Clash with Native Americans Over an Ancient Hunting Tradition, 11 J. ENVTLL. & LITIG. 59, 384 (1996).


to whaling regardless of international protocols.134 Ireland withdrew its

membership from the International Convention to Regulate Whaling.135

Norway resumed whaling in 1993.136 Russia and Japan indicated that they

would consider reintroducing whaling practices in the future.137 Iceland

called a meeting of pro-whaling states with the intention of forming an

entirely new whaling regime.138 The possibility arose that widespread un-

regulated whaling might again be performed on the open seas, a practice

that has not occurred since 1960.139 The coercive efforts of the United

States resulted in the remobilization of an interest group dedicated to op-

posing U.S. intervention. U.S. sanctions fed the sense of grievance that

has led the minority to take drastic action.140 A Norwegian foreign min-

ister commented that [i]t would be intolerable if a small country were to

be pressured into submission by big countries who only wish to pay en-

vironmental penance in currency of negligible value to them.141

Fifth, coercive trade sanctions can devastate the economies of devel-

oping countries. Developing countries resent sanctions or the threat of

sanctions by the United States as a brand of economic colonialism. The use

of coercive tactics by the United States serves to signal to newly developing

democracies that coercive economic power is not only acceptable but a pre-

ferred method of international trade policy. Instead, the United States as a

leading economic power should serve as a role model for emerging nations.

Finally, and perhaps most importantly, coercive tactics fail to address

the underlying causes of rampant intellectual property piracy in develop-

ing countries. Coercive sanctions do not address, but rather may exacer-

bate, the poverty and unemployment in developing countries that makes

the production of pirated goods and the purchase of illegal patented drugs

134CHAYES & CHAYES, supra note 132, at 102.

135Id.

136Id.; Beck, supra note 133, at 384.

137CHAYES & CHAYES, supra note 132, at 102.

138Id.

139Id.

140Id.

141Id. (quoting J.J. Holst, foreign minister of Norway, Norwegian Information Service, NoriformWeekly Edition, no. 26 (Aug. 31, 1993)). See also Norway Stands Firm on Whaling Issue, NoriformWeekly Edition, available at http://www.norwaves.com/norwaves/Volume1_1993/v1nw16.html.


so tempting.142 No matter how coercive sanctions may be, strong incen-

tives still remain in place to sell and purchase pirated goods.143

B. Responses to U.S. Coercion: China and India

Coercive efforts to change a foreign nations behavior can provoke a va-

riety of reactions ranging from immediate compliance to a threat of a trade

war. This section focuses on two of the four BRIC countries, China and

India, and their respective responses to U.S. pressure to protect intellec-

tual property rights. China and India reacted quite differently to threats of

U.S. sanctions. However, both reactions resulted in little improvement of

intellectual property rights for U.S. firms. These experiences can provide a

baseline for altering U.S. strategy to improve protection of intellectual

property rights abroad.

1. The Retaliation Cycle: The Chinese Reaction to U.S. Coercion

One of the most prominent examples of the limitations of coercive trade

policies involves Chinas relationship with the United States. In 1979, both

countries agreed that each nation would treat the others patent and trade-

mark protection the same.144 However, China implemented its new trade-

mark and patent laws within the context of socialist principles of public

ownership, the effect being that few private individuals managed to obtain

work-related patents in their own names.145 Eventually, the United States

lost patience and sought proactive responses to Chinas lack of enforce-

ment. In 1988, the U.S. Congress augmented the Trade Act of 1974 by

giving expanded powers to the USTR and imposing strict deadlines on

investigation and action against foreign unfair trade practices.146 The

142See, e.g.,Winston P. Nagan, International Intellectual Property, Access to Health Care, and HumanRights: South Africa v. United States, 14 FLA. J. INTL L. 155, 15859 (2002).

143Lin, supra note 70, at 209 (citing an author of China Business Review who states copying isnot considered to be morally wrong in China because it has traditionally been a legitimate wayto learn and share knowledge.).

144Agreement on Trade Relations Between the United States of America and the PeoplesRepublic of China of 1979, July 7, 1979, P.R.C.-U.S., 31 U.S.T. 4652.


146See supra note 62.


USTR placed China on its Priority Watch List pursuant to these powers the

following year.147

In response to the USTRs action, China enacted new intellectual

property laws. Nonetheless, American businesses increasingly complained

that their intellectual property rights remained unprotected and that pi-

racy was widespread. In 1991, China was designated as a Priority Foreign

Country and the USTR launched an investigation into Chinas intellectual

property protection practices.148 As a result, the United States threatened

to impose tariffs on Chinese textiles, shoes, electronics, and pharmaceu-

ticals worth $1.5 billion.149 This time the Chinese chose to retaliate. China

responded with tariffs worth a similar amount on American aircraft, cot-

ton, corn, steel, and chemicals.150 After six rounds of negotiations,151 Chi-

nese and American representatives managed to reach a compromise just

before the sanctions would have been implemented.152 The parties signed

a Memorandum of Understanding on January 17, 1992 (1992 MOU) and

narrowly averted what would have been a costly trade war.153

As a result of the 1992 MOU China significantly improved its intel-

lectual property laws. Pursuant to the terms of the MOU, China joined the

Berne Convention in 1992 and the Geneva Convention in 1993.154 Pur-

suant to these conventions, China amended its copyright law and issued

implementing regulations.155 The new laws protected software programs

for fifty years, removed formalities on copyright protection, and extended


148Id. at 14142.

149Id. at 142.

150Id.

151Paul C.B. Liu, U.S. Industrys Influence on Intellectual Property Negotiations and Special 301Actionss, 13 UCLA PAC. BASIN L.J. 87, 112 (1994).


153Id.; Liu, supra note 151, at 112.

154Warren Newberry, Note, Copyright Reform in China: A TRIPS Much Shorter and Less Strangethan Imagined?, 35 CONN. L. REV. 1425, 1439 (2003) (citing Memorandum of UnderstandingBetween the Government of the Peoples Republic of China (PRC) and the Government of theUnited States of America on the Protection of Intellectual Property, Jan. 17, 1992, P.R.C.-U.S.,34 I.L.M. 677 at art. 3(1) and 3(2)).



the protections to all works originating from a Berne Convention coun-

try.156 China also amended its 1984Patent Law, implemented patent reg-

ulations, and agreed to the terms of the Patent Cooperation Treaty.157 In

1993, China upgraded its trademark law to include criminal penalties and

adopted a new unfair competition law protecting trade secrets.158 China

established specialized intellectual property courts to hear cases and its

Supreme Court issued a circular instructing lower courts to address intel-

lectual property cases expeditiously.159 By any measure of the time, the

1992 MOU was as an enormous success for the United States. Within the

three-year period from the adoption of the 1992 MOU China improved its

intellectual property protections on all fronts.

It soon became clear, however, that China was not effectively enforcing

the new laws.160 American businesses complained again about the lack of

intellectual property protection.161 In fact, China allowed the rapid growth of

the exportation of pirated products.162 The USTR again placed China on its

Priority Foreign Country list and launched an investigation.163 On June 30,

1994, the USTR designated China as a priority foreign country pursuant to

its Special 301 powers.164 The Clinton Administration threatened to impose

tariffs against $1 billion worth of Chinese imports.165 China quickly retaliated

by threatening tariffs against various American-made products and suspend-

ed joint venture negotiations with U.S. automobile companies.166 Again at

the eleventh hour, U.S. and Chinese negotiators reached a compromise.

156Id. at 143.

157Id. at 142.

158Id. at 143; Newberry, supra note 154, at 1440.

159Lin, supra note 70, at 205.

160Charles Tiefer, Sino 301: How Congress Can Effectively Review Relations with China After WTOAccession, 34 CORNELL INTL L.J. 55, 64 (2001).

161Yu, supra note 54, at 143 (citing Patrick H. Hu, Mickey Mouse in China: Legal and CulturalImplications in Protecting U.S. Copyrights, 14 B.U. INTL L.J. 81, 93 (1996)).

162Gregory S. Feder, Enforcement of Intellectual Property Rights in China: You Can Lead a Horse toWater, But You Cant Make it Drink, 37 VA. J. INTL L. 223, 24142 (1996).




166Id.


The new agreement established an enhanced copyright verification

system, intensified border protection, and imposed training and education

requirements for enforcement authorities.167 In exchange, the United States

promised to terminate its section 301 investigation of China, to remove its

Priority Foreign Country designation, and to rescind the order imposing

retaliatory tariffs.168 An accompanying action plan offered detailed in-

structions on executing the letters commands.169 Within the first few

months, China conducted massive raids against intellectual property in-

fringers throughout China.170 Deputy U.S. Trade Representative Charlene

Barshefsky called the implementation of the agreement very promising.171

However, by the end of 1995, it became clear that the agreement was not

producing the intended results.172 Representatives of software, motion pic-

ture, and record companies again argued that China had done little to curb

the massive production and export of pirated products.173 On April 30,

1996, China was again designated a Priority Foreign Country.174 Both coun-

tries threatened sanctions.175 A compromise on June 17, 1996 resulted in the

United States dropping China from its Special 301 list in exchange for Chi-

nas promises of improved enforcement of intellectual property rights.176

167Peter K. Yu, The Copyright Divide, 25 CARDOZO L. REV. 331, 35960 (2003).

168Yu, supra note 54, at 146. Commentators praised the agreement, one lauding it as thesingle most comprehensive and detailed [intellectual property] enforcement agreement theUnited States had ever concluded. Id. at 148 (quoting Helen Cooper & Kathy Chen, ChinaAverts Trade War with the U.S., Promising a Campaign Against PiracyFAccord also Opens Market toU.S. Movies, Music and Computer Software, WALL ST. J., Feb. 27, 1995, at A3).

169Id. at 14647.

170Feder, supra note 162, at 245.

171Id. at 245 n.138.


173Anne Phelan, China Urged to Meet IPR Obligations, 17 E. ASIAN EXEC. REP. 5, 5 (1995). Forexample, when Microsoft created a Chinese version of Windows 95 with a planned retail priceof $45, the product was already available in open markets one week before its release. Id. at14849.


175The Clinton administration announced planned sanctions against $2 billion in trade goods.Id. at 14849. Within thirty minutes of the announcement, China responded with its ownretaliatory sanctions on American products of equal value. Id. at 149.



From the above history of U.S.China relations, a cycle of behavior

becomes evident. The cycle begins with complaints by private American

interests, resulting in threats by the U.S. government, followed by coun-

terthreats by the Chinese government, eventual compromise and agree-

ment, and ending with the subsequent lack of full implementation of the

agreement resulting in the commencement of a new cycle of behavior.177

The cycle is summarized in Exhibit 1.

This cycle, nonproductive as it may appear, has actually produced

some positive, mostly short-term, results. China has improved its legal

framework and has shut down some producers of pirated music.178

Chinese piracy, however, still remains rampant.179 In sum, the China

Cycle of Coercion has not produced the wanted long-term objectives of

U.S. policy.

2. The Delay Cycle: The Indian Reaction to U.S. Coercion

India has responded differently than China to U.S. pressure. Instead of

threatening American interests, India simply progresses toward compli-

ance at the slowest pace possible that avoids sanctions. For example, during

the GATT Uruguay Round, India was a leading opponent of making in-

tellectual property a trade issue and was opposed to the development of

the TRIPS regime.180 As TRIPS became a reality, India pursued the goals

of meeting the TRIPS requirements at a glacial pace.181 Article 70.8(a)

177This cycle has been adapted from Yu, supra note 54, at 13435.


179See supra text accompanying notes 11013.

180Elaine B. Gin, International Copyright Law: Beyond the WIPO and TRIPS Debate, 86 J. PAT. &TRADEMARK OFF. SOCY 763, 781 (2004) (Particularly the Group of Ten (G-10) developingcountries (Argentina, Brazil, Cuba, Egypt, India, Nicaragua, Nigeria, Peru, Tanzania, andYugoslavia) vehemently opposed placing IP on the agenda of the Uruguay Rounds.).

181Even after 1995 Indian representatives still resisted the implementation of TRIPS. In No-vember 1996, Indian lawmakers organized a conference to discuss intellectual property rightsenforcement under TRIPS. N. Vasuki Rao, Anti-piracy Conference Turns, Instead, Anti-U.S., J.COMMERCE, Nov. 15, 1996, at 5A. The conference, organized by Indian anti-TRIPS lawmakers,quickly devolved into a bashing of the United States and an organizing of efforts to resist U.S.action on intellectual property. Id. When one Indian representative suggested that countriesrefuse to implement the TRIPS agreement until the United States repeals the Omnibus Tradeand Competitiveness Act of 1998, it received significant support. Id.


1. A

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Exhibit1:TheChinaCycleofCoercion


of TRIPS182 required that India amend its patent law to allow its patent

office to accept submissions for pharmaceutical and agricultural chemical

product inventions183 as required by TRIPS. Unfortunately due to a

procedural mishandling of the TRIPS enabling legislation by the Indi-

an Parliament, the amendment was not adopted at the time the patent

office began receiving pharmaceutical and agricultural product patent ap-

plications from foreign interests.184

The United States grew impatient with Indian delays in enacting the

required enabling legislation and placed India on its list of priority watch

countries, opened an investigation into Indias failure to protect pharma-

ceutical and agricultural chemical product patents as required by TRIPS,

and sought consultation with the WTO.185 The U.S. requested that the

dispute settlement body determine whether India had failed to satisfy its

obligations under TRIPS.186 The WTO Dispute Settlement Body conclud-

ed that India was in a state of noncompliance by not amending its patent

legislation.187 India appealed, and the Appellate Body upheld the Boards

findings and conclusions.188 The decision was formally adopted by the

WTO Dispute Settlement Body in January 1998 with a March 2, 1998

deadline for India to amend its patent legislation.

182See Report of the Panel, India-Patent Protection for Pharmaceutical and AgriculturalChemical Products, Sep. 5, 1997, WT/DS50/R (1997), at para. 2.3 [hereinafter Panel Report].

183David K. Tomar, Note, A Look Into the WTO Pharmaceutical Patent Dispute between the UnitedStates and India, 17 WIS. INTL L.J. 579, 585 (1999).

184On December 31, 1994, the President of India promulgated a patents ordinance thatamended Indias Patents Act of 1970. However, Indian ordinances have the force of law pro-vided that both houses approve of the ordinance within six weeks after the beginning of a newhouse of parliament. Srividhya Ragavan, Cant We All Get Along? The Case for a Workable PatentModel, 35 ARIZ. ST. L.J. 117, 143 (2003). The president was able to promulgate these changesbecause Article 123 of the Indian Constitution enables the president to legislate when one orboth houses in parliament are not in session and the president is satisfied that circumstancesexist which render it necessary for him to take immediate action. The previous year theIndian parliament had debated making the amendments that TRIPS required but adjournedwithout reaching the conclusion. Tomar, supra note 183, at 585. This is probably what led theIndian president to act according to his emergency powers. Id.

185Id.

186Ragavan, supra note 184, at 144.

187Id. at 145. See also Panel Report, supra note 182, at z 8.1.

188See Report of the Appellate Body, India-Patent Protection for Pharmaceutical and Agri-cultural Chemical Products, Dec. 19, 1997, WT/DS50/AB/R (1997).


The March 1998 deadline passed without compliance.189 The United

States agreed to extend this deadline three times in order to work out a

compromise on how to implement Indian patent legislation.190 In April

1998, the two parties informed the dispute settlement body that they had

finally agreed upon a timetable for compliance giving India until April 19,

1999 to implement legislation.191 A temporary emergency measure was

passed by the Indian Parliament in March 1999 in an attempt to comply

with TRIPS.192 Meanwhile, the backlog of unprocessed patent applications

exceeded 30,000.193

On February 21, 2000, U.S. pharmaceutical representatives request-

ed that the USTR place India on the Priority Foreign Country list because

of Indias refusal to adopt adequate and effective protection for pharma-

ceutical products and . . . their denial of equitable market access to U.S.

firms.194 India, again under pressure from the United States, introduced

the Patents Amendment Bill 1999 in the upper house on December 20,

1999 to have Indian patent law comply with TRIPS.195 The bill did not

pass but it was referred to a committee for further review.196 In 2002, a

revised bill was drafted to incorporate developing-country-favorable safe-

guards, which allows nations to initiate compulsory licensing of patented

drugs in a national emergency.197 This revised bill, however, did not in-

corporate the products patent regime that Article 27 of TRIPS required.198

189Tomar, supra note 183, at 589.

190Id.

191Id.

192Ronald J.T. Corbett, Protecting and Enforcing Intellectual Property Rights in Developing Coun-tries, 35 INTL LAW. 1083, 1097 (2001).

193Id.

194Press Release, PhRMA, PhRMA Calls for Vigillance [sic] on Intellectual Property Protection;Recommends Argentina, Egypt and India as Priority Foreign Countries, at http://www.pharma.org/mediaroom/press/releases///21.02.2000.20.cfm (Feb. 21, 2000).

195Ragavan, supra note 184, at 146.

196Id. at 148.

197Id. at 148 & n.312.

198Id. at 148. Article 27 of TRIPS requires signatories to offer patent protection for any in-vention without discrimination as to the field of technology. Bryan Mecurio, The Impact of theAustralia-United States Free Trade Agreement on the Provision of Health Services in Australia, 26


On March 23, 2005, India finally passed into law.199 the required product

patents regime for pharmaceutical, agricultural, and software products.200

Yet even the adoption of the law failed to resolve all the outstanding

issues regarding TRIPS implementation. The law failed to resolve critical

issues of data exclusivity for product patents and compulsory licensing

of pharmaceuticals.201 Indias sluggish efforts to improve intellectual

property rights have successfully allowed India to stave off full implemen-

tation of TRIPS and its stringent intellectual property standards. The

India Cycle of Coercion (see Exhbit 2) is characterized by prolonged,

graduated responses to U.S. coercive tactics. When India finally does re-

spond, it usually completes the bare minimum necessary to avoid economic

sanctions. The result is a frustratingly slow effort, at least from the per-

spective of the United States, in the improvement of intellectual property

protections.

Why does India react so differently than China to U.S. coercion? The

answer lies at least in part with the unique nature of Indias economy and

history. Twenty-five years ago, Indian and Chinese citizens possessed sim-

ilar per capita incomes.202 Today, Chinese incomes are nearly double that

of their Indian counterparts.203 While China has embraced globalization

and international trade, Indian economic reforms have been slower to

take hold. A 1999 study compared Chinese and Indian practices toward

trade in various areas such as agriculture, information technology, and

WHITTIER L. REV. 1051, 1094 (2005); Harris, supra note 46, at 106. For example, developingcountries cannot treat patents protecting food, agriculture, medicines, and software differ-ently than other patentable inventions. Id. This includes whether the patents are for productsor processes. Id.

199Phrma Welcomes Passage of Patent Bill in India, (Mar. 23, 2005), available at http://www.phrma.org/news_room/press_releases/phrma_welcomes_passage_of_patent_bill_in_india/.

200Patents Bill: Govt takes Left on board, Business Standard, Mar. 19, 2005, at 1 (available at 2005WLNR 4249411).

201Patently Unclear: A Crucial New Intellectual Property Regime Disappoints, THE ECONOMIST, Jan.22, 2005, 63.

202A.V. Rajwade, India and China: A Comparison, Jan. 18, 2005, at http://www.rediff.com/money/2005/jan/18guest.htm. See generally Subramanian Swamy, The Economic Distance Between Indiaand China, 195573, 70 CHINA Q. 371 (1977).

203Id.


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Exhibit2:TheIndiaCycleofCoercion


services.204 The study found China possessing equal or superior open

market regulations to India in all eight categories studied.205

Whereas Chinese infrastructure improvements backed by foreign

agreements move speedily along once government approval has been giv-

en, litigation and political debate have significantly slowed equivalent im-

provements in India.206 India may lose foreign direct investment as a

result.207 India lacks a Chinese equivalent of a Hong Kong that can effi-

ciently finance commercial activity throughout the country.208 As a result,

India lacks the bargaining power that China possesses to negotiate from a

position of strength with the United States.209

The delay cycle of coercion, however, has worked with a degree of

success for India. India even today has still not fully complied with TRIPS

and U.S. governmental and private interests continue to apply pressure in

order to achieve additional progress in this area. The Indian response

tactics to U.S. coercion provides a model for other developing countries,

such as Brazil and Russia, that do not possess sufficient strength to respond

directly to U.S. threats with countersanctions. The lesson from the India

Cycle of Coercion is not that U.S. coercion is not strong enough, but rather

that coercion alone cannot produce a successful long-term result of pro-

tecting intellectual property rights internationally.

204Daniel H. Rosen, China and the World Trade Organization: An Economic Balance Sheet, Institutefor International Economics Policy Brief 99-6, available at http://www.iie.com/publications/pb/pb.cfm?ResearchID=93.

205Id.

206Danielle Mazzini, Stable International Contracts in Emerging Markets: An Endangered Species?,15 B.U. INTL L.J. 343, 359 (1997). See also Jayanthi Iyengar, India v. China: Its all in the Mind,ASIA TIMES Nov. 19, 2002, available at http://www.atimes.com/atimes/Asian_Economy/DK19Dk01.html.

207Mazzini, supra note 206, at 359 (Many investors compare China and India when deter-mining where to invest . . . [and] China may have the edge.); Iyengar, supra note 206, at 2 (Asof today, China is undoubtedly an attractive investment destination, with consumer demandgrowing at rates far exceeding expectations. This is unlike India, which has proved expertestimates wrong[.]).

208Jesse Parker, The Lotus Files: The Emergence of Technology Entrepreneurship in China and India,26 FLETCHER F. WORLD AFF. 119, 132 (2002).

209E.g., Iyengar, supra note 206, at 1 ([China] already figures on the list of the US for ex-clusive trading partners, rubbing shoulders with Canada, Mexico and Japan. The admissionthreshold for this exclusive club is US$120 billion in two-way trade.). Indias trade with theUnited States nowhere reaches this amount. Rosen, supra note 204, at 5.


IV. INTERNATIONAL BARGAINING AND THE USE OFUNILATERAL INITIATIVES

As shown in Part III above, a common response to a nations undesirable

behavior is to impose sanctions until the target nation ceases that behavior.

It showed that sanctions generally have limited or short-term success in the

context of intellectual property rights. This part will discuss the use of

unilateral initiatives as a strategy to establish long-term change in intel-

lectual property protection in the BRIC countries.

This part defines unilateral initiatives and explains the difference

between a unilateral initiative strategy and a reciprocal strategy of bar-

gaining. It will then offer real-world examples of private enterprises using

unilateral initiatives to successfully navigate difficult foreign markets while

still protecting their intellectual property. This part concludes that unilat-

eral initiatives can play a significant role in protecting intellectual property

rights in the BRIC countries.

A. The Unilateral Initiative as a Bargaining Tool

A unilateral initiative is defined as a voluntary, conciliatory action present-

ed by one party to the benefit of the other.210 A unilateral initiative is nei-

ther conditioned upon past compliant conduct or immediate expectation

of future compliance.211 Unilateral initiatives are not merely gifts, but

constitute any action that is taken without immediate expectation of re-

sponse from the receiving party. Unilateral initiatives are usually consider-

ed to be positive, but do not necessarily have to present positive benefits to

the receiving party. Unilateral initiatives may also be used positively to

benefit the receiving party and negatively to impose punishment, sanc-

tions, or economic harm. This article concentrates on the use of unilateral

initiatives that promote positive change for both the initiator and the

recipient.

The modern theory o

bric ip enft

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