Turning TRIPS on It's Head: An IP 'Cross Retaliation' Model For Developing Countries

Abstract

The biblical David vs Goliath paradigm plays out very frequently in international trade disputes. In 2003, a tiny island state, Antigua and Barbuda (hereafter Antigua) took on the United States (hereafter US) in a WTO (World Trade Organisation) dispute, alleging that the US violated GATS (General Agreement on Trade in Services) obligations by effectively foreclosing their borders to overseas internet gambling services. It won at both the panel and the appellate levels. However, to this date, it has been unable to secure compliance by the US.

Since "traditional" retaliation (Antigua retaliating in the same sector by suspending its GATS obligations to open up it's various service sectors to US businesses) was more likely to hurt Antigua than the US, such a remedy would have been practically meaningless.

Therefore Antigua pleaded for and obtained the right to “cross retaliate” by suspending the intellectual property rights (IPR) of US corporations. Naturally, this retaliation under another agreement (namely TRIPS) has a better potential of inducing compliance by defaulting developed countries such as the US, since strong IP lobbies in such countries are likely to pressurize their governments into a compliance or settlement. The WTO granted such an authorization to Ecuador in 2000 and to Brazil more recently in September 2009, albeit conditionally.

Despite the procurement of an authorization to cross retaliate, Antigua is yet to implement it and is currently in negotiation talks with the US. More worryingly perhaps, it has not yet changed its domestic law or announced as to how it would go about operationalising the cross retaliation authorization.

One potential reason for Antigua’s failure to come up with any concrete model could be the uncertainty in determining a viable IP suspension model that remains WTO consistent by ensuring that the value of loss from the suspension of IP is equivalent from the losses caused to Antigua. This uncertainty will no doubt be exploited by the US in its negotiation talks with Antigua.

This paper therefore seeks to work out a detailed IP suspension model that could help countries such as Antigua. It proposes a “Tiered IP suspension model”, where certain kinds of IP are targeted first for suspension before others, depending on the ease of objectively ascertaining the value of IP and thereby the harm caused by the unauthorized use of such IP and/or the potential to induce compliance by the defaulting state. Illustratively, copyrights over sound recordings that have established rates for public performance are targeted first. If working with this tier of IP subject matter does not yield desired results, then the complaining state moves on to other IP where it is relatively more difficult to compute the loss caused to the IP owner (such as pharmaceutical patents) but which may be a more powerful tool to induce compliance. Such a model could be useful for a large number of developing countries such as India and Brazil, that often find that, despite WTO victories, scofflaw states such as the US and EU fail to comply. Towards this end, this paper offers a very concrete “development” oriented international trade law remedy.

Keywords: WTO, Developing Countries, Retaliation, TRIPS, Intellectual Property Rights, Cross Retaliation, Antigua Gambling Dispute

JEL Classification: K00, K33, 034