Hijacking the Special 301 Process: We will all suffer the consequences

It’s Special 301 season again. This is the time of the year when the US Trade Representative’s Office (USTR) conducts its annual Special 301 reviews on the policies and practices of foreign governments regarding whether they deny adequate and effective protection and enforcement of intellectual property (IP) rights, and whether there is denial of fair and equitable market access for US products that rely upon IP rights. Congress enacted Special 301 as part of the Omnibus Trade and Competitiveness Act of 1988, amending the 1974 Trade Act. In adopting the legislation in 1988, Congress expressly noted the importance of international protection of intellectual property rights to the competitiveness of the US. As stated in the Act, the purpose of Special 301 “is to provide for the development of an overall strategy to ensure adequate and effective protection of intellectual property rights and fair and equitable market access for United States persons that rely on protection of intellectual property rights.” (1988 Trade Act, §1303(a)(2), 102 Stat. 1179.) However, this year the process is in danger of being hijacked by interests that want to use the annual exercise to roll back rather than strengthen copyright protection. More on this below.

As part of the Special 301 review process, USTR produces an annual report for Congress that identifies the foreign countries that fail to provide adequate and effective IP protection or fair and equitable market access for IP products, and designates them into several categories. The most egregious offenders, of which there are typically very few, are labelled “Priority Foreign Countries”. Countries in this category are subject to an investigation that in rare cases may result in various trade sanctions. Other countries, depending on the level of identified IP shortcomings, are labelled “Priority Watch List” countries or “Watch List” countries. Sometimes countries are put in a special category requiring an early “out of cycle” review to encourage progress on certain areas of concern. Many countries do not feature on the list at all while others are included year after year.

The process begins with inputs from various stakeholders, such as associations representing copyright and patent holders, anti-counterfeiting alliances, and other related industry associations. Foreign governments can provide input to the process and US embassies abroad are tasked with contributing their assessments. Finally, after an inter-agency review process, USTR draws up its report which is provided to Congress. The process is taken seriously by foreign governments, who do not wish to have an unnecessary irritant in their relations with the United States, nor to have their reputations “tarnished.” In support of Special 301, there is also a constructive program of working with identified countries to improve their record of protecting IP, by providing training, information and education. This process benefits not only US rights holders, but all IP stakeholders, including artists, creators, innovators, and brand owners in other countries. While the annual Special 301 report covers all the main areas of IP–trademarks, patents and copyright–infringement of copyright was one of Congress’s original motivations for creating the Special 301 statute and has formed an important element of the reports since its inception.

This year, over 50 organizations have filed recommendations to USTR for the 2016 Special 301 proceeding. Several of them have little to do with protecting IP, but instead are focused on various aspects of loosening or weakening intellectual property protection, particularly in the area of copyright. For example, the Computer and Communications Industry Association (CCIA) and the Internet Association (IA) have filed comments calling on USTR to not only highlight enforcement measures in the Report, but also to support limitations, exceptions “and other balancing measures” on which U.S. stakeholders allegedly depend as they do business overseas. (see www.regulations.gov and search for USTR-2015-2022). The CCIA submission argues that Australia’s safe harbors are too narrow and violate Australia’s FTA obligations, asserts that Germany and Spain’s ancillary rights laws violate international law, and presses USTR to push foreign countries to expand exceptions and limitations. The IA urges USTR to expand its advocacy beyond the scope of the Special 301 statute in order to highlight the importance of exceptions and limitations in copyright law and the importance of safe harbors, and IA is critical of prior Special 301 reports that focus solely on protection and enforcement.

This is a very strange perversion of the process that was originally designed and mandated by the US Congress to protect the intellectual property rights of US industries. From reading the legislative history, it is clear that the Congress intended the Special 301 legislation to respond to the problems of counterfeiting and piracy, which at the time were impacting (and continue to impact) a wide range of industries doing business overseas. It was the intent of Congress that the Special 301 provisions were to be used to strengthen protection of intellectual property rights, not as a means to roll back protection by broadening exceptions and limitations.

For copyright holders and industries in the US and abroad, this hijacking of Special 301 to try to undermine instead of bolstering copyright protection has to be cause for alarm. The Special 301 process, while not perfect and inevitably subject to political considerations, has nonetheless achieved remarkable progress in raising the standard of copyright and IP protection generally over the past twenty plus years. While governments have grumbled, in most cases they have responded with better enforcement of their international treaty obligations through better cooperation and enhanced resources, improved legal processes and regimes, updating of laws for the digital age including provisions to limit online piracy, and other measures that have not only reduced pressure on them from the US government but have benefited rights holders globally. For this system to now become a vehicle for weakening copyright provisions is both a perversion of the process and intent of the legislation, and could be a real threat to the edifice of copyright protection that has been built up over many years.

At the end of the day, it is the USTR that will decide whether or not to incorporate proposals from those industry associations that appear to be trying to hijack the Special 301 process and use it to dilute rather than enhance copyright protection. Let us hope that does not happen. While copyright stakeholders outside the US do not have a direct voice in this process, the stakes for them are nonetheless real and substantial, as they are for US copyright industries. Watch carefully.

(c) Hugh Stephens,  March 2, 2016