KEI looks at USTR letter to Wyden, and conflicts between ACTA and patent reform

On January 6, 2010, Senator Ron Wyden sent a letter to the USTR asking a number of questions about the U.S. negotiating objectives in ACTA. On February 28, 2010, USTR responded. The USTR response focused mostly on the official U.S. "asks," rather than the state of the negotiating text, which also reflects also the views of other parties. For this reason, the USTR letter to Wyden only tells part of the story about what ACTA may do.

On March 1, 2010, a European Union document leaked discloses several key sections of the ACTA text, including those relating to damages, injunctions, provisional measures and the Internet. This note highlights a few issues in the USTR letter to Wyden, in the context of what is known so far about the ACTA negotiating text.

Patents included in ACTA

USTR is now acknowledging, for the first time, that the U.S. has asked that patents be included in ACTA. In briefings in 2009, USTR said the US only wanted ACTA to cover trademarks and copyrights, and that it was the position of the European Union to include patents and other types of intellectual property. The leaked EU analysis reported the US had supported including "all intellectual property" in the civil enforcement sections of ACTA, and this is now finally acknowledged by USTR. It is unclear why the USTR had said the opposite in several briefings to Congress and the NGOs in 2009.

USTR acknowledges ACTA will require that judges have the authority to issue injunctions

KEI has spent an enormous amount of time meeting with USTR and Congressional staff to discuss the issue of injunctive relief, and we have provided USTR will the specific areas in U.S. law where U.S. law does not allow for injunctions, as well as where legislation is being considered that would eliminate injunctions for certain cases. It is hard to understand how the USTR can on the one hand claim that ACTA will not change U.S. law, while on the other hand, acknowledge that they are asking for an agreement that will "require" judges to have the authority to issue injunctions.

As detailed here, the following are areas in U.S. law that DO NOT permit injunctions, for specific cases.

  • The Safe Harbour infringement exception for generic medicines: 28 USC 271 (e) (3)
  • Patent infringement involving medical practitioners: 35 USC 287 (c)(1)
  • Nuclear power: 42 USC 2184
  • Use of patents by or for the government: 28 USC 1498 (a)
  • Use of copyrighted works by or for the government: 28 USC 1498 (b)
  • Use of plant variety by or for the government: 28 USC 1498 (d)
  • Innocent infringement by printers and publishers: 15 USC 1114
  • Protection of Semiconductor Chip Products: 17 USC Chapter 9

KEI has also discussed with USTR, on several occasions, the fact that proposed legislative solutions to copyrighted "orphaned works" have included areas where injunctions would be eliminated.

Article 44.2 of the TRIPS Agreement does permit WTO members to eliminate the possibility of injunctions, in cases where the law provides for compensation or remuneration. KEI has been highly critical of ACTA language that would eliminate this flexibility.

In reading the most recent version of the ACTA negotiating text, it seems as though the USTR is advocating changes in U.S. law in several important areas, and would block the solutions that have been proposed to address the orphaned copyrighted works issue. USTR should be asked to clarify this issue.

USTR did not address Senator Wyden's question about royalties in lieu of injunctions

In question 4.a, Senator Wyden asked about the current practice in the U.S. of imposing a royalty in lieu of an injunction, in cases involving infringement. In such cases, which have become quite common following the unanimous 2006 U.S. Supreme Court decision in eBay v MercExchange, judges have the authority to allow an infringement to continue, while imposing a "running royalty" to compensate the patent owner. Often these royalties are quite low, when the judge is not impressed with the quality of the patent or the importance of the patented invention. What USTR did not tell Senator Wyden is that ACTA seeks to ramp up damages in patent infringement cases.

First, there is the issue of what methodologies can be or must be considered when determining damages. The US and Japan have proposed in ACTA that judicial authorities be required to consider:

"any legitimate measure of value that may be submitted by the right owner."

Considering the proposals by all countries, the current ACTA negotiating text on damages reads as follows:

(b) in determining the amount of damages for infringement of intellectual property rights, its judicial authorities shall consider, inter alia [EU: the lost profits] the value of the infringed good or service, measured by the market price, the suggested retail price, or other legitimate measure of value submitted by the right holder, [EU: the profits of the infringer that are attributed to the infringement].

There are other elements in the text of the ACTA that also would seem to increase royalty norms. One is the EU proposal in Article 2.1 of the ACTA to require that "measures, procedures and remedies shall also be effective, proportionate and deterrent." [Emphasis added] A small running royalty may not be seen as meeting the requirement that the remedy be a "deterrent" of future infringement.

The USTR negotiating objectives on damages run counter to US patent reform legislation

Compare the US position on patent damages in ACTA to the March 4, 2010 language on the patent reform legislation from the Senate Judiciary Committee:

5 SEC. 4. DAMAGES.

‘‘(b) PROCEDURE FOR DETERMINING DAMAGES.—

‘‘(1) IN GENERAL.—The court shall identify the methodologies and factors that are relevant to the determination of damages, and the court or jury, shall consider only those methodologies and factors relevant to making such determination.

This is the so called "gatekeeper compromise," which is designed to allow judges to rein in damage awards.

Thus, the ACTA seeks to give patent owners greater ability to frame damages, including through the use of more aggressive methodologies, while the Senate patent reform bill, aims to curb "runaway damage awards that were harming innovation."[*]

USTR has known that the issue of damages for infringement is very controversial. Yet in the February 12, 2010 EU document, the USTR is shown to be pushing for aggressive increases from the WTO TRIPS norms on damages for infringement.

USTR Refuses to answer question about non-counterfeited goods in transit.

In question 4.b, Senator Wyden directly asked USTR about the issue of legitimate generic drugs that were not counterfeits, moving through national markets with different patent landscapes. A similar issue was addressed in question 8, about "goods in transit."

This issue was highlighted by public health groups after controversies in 2009 when Dutch, German and Belgium authorities seized legitimate generic medicines in transit from Asia to markets in Africa and Latin America. One such seized shipment involved 2nd generation AIDS drugs scheduled to be delivered to the Clinton Foundation, at the US Embassy in Nigeria. USTR would not say how legitimate goods in transit from a non-patent market to another non-patent market would be treated "in transit" through countries with patents, such as in the highly publicized cases in Europe last year, other than to say that the US was only seeking certain border enforcement measures as they relate to copyright and trademark. The USTR answer was incomplete, and illustrates how little the US government is concerned about the threats to the movement of legitimate generic drugs in developing countries.

[*] February 25, 2010, Juliana Gruenwald, "Leahy: Patent Deal Is Close," Tech Daily Dose, National Journal.