US Foreign Policy on Intellectual Property: USTR Special 301 Process

The Office of the United States Trade Representative (USTR) initiates bilateral and multilateral trade negotiations in order to increase the overseas rights of major US intellectual property owners. One of the most powerful weapon’s in the USTR’s arsenal is its "Special 301" process.

Section 301 of the 1974 Trade Act (19 USC § 2411) confers on the United States Government, the right to impose trade sanctions against foreign countries, whose policies and practices violate trade agreements with the US, restrict US commerce, or provide inadequate protections for the rights of US intellectual property holders. The USTR is granted broad discretionary powers in determining which country should become a target of the section 301 trade sanctions. The USTR is an officer of the executive branch of the US Government and serves at the pleasure of the President of the United States.

According to section 301, any foreign country’s policy or practice that violates or is deemed unfavorable to the legal rights of the US are sufficient to impose trade sanctions. And the US President can unilaterally decide that a particular country provides inadequate protection for the US intellectual property industry and impose trade sanctions on that country also.

A Section 301 investigation is commenced by a complaint petition being filed with the USTR, often by industry organizations. The USTR then commences an inquiry of the complaint within 45 days. Once an investigation is initiated, the USTR must consult with the foreign country and also provide the public with an opportunity to comment on the proceedings. As a general rule, the USTR is allotted 18 months from the initiation date to conclude its investigation and publish its report in the Federal Register. If an investigation involves a violation of a WTO trade agreement or a NAFTA trade agreement, protocol requires the USTR to follow dispute settlement regulations set out in the agreement.

By April of every year, the USTR is required to release its annual report categorizing its trade partners based on their IPR laws. IP Justice created a table that summarizes the USTR Special 301 Reports from 2004-2007.

Pursuant to Section 301, the USTR has created three categories for its trading partners: “Priority Foreign Country,” “Priority Watch List,” and “Watch List.” Priority Foreign Countries are those whose laws and policies have the least protection for the rights and interests of US IP holders. These countries are subject to heightened investigation procedures and possibly immediate sanctions. Nations placed on the Priority Watch List and the Watch List are accused of providing inadequate IPR protection. A country placed on the Priority Watch List becomes the focus of increased bilateral talks to amend that country’s laws and practices. The USTR further monitors such countries’ compliance with these agreements and trade sanctions will be used as the ultimate persuasion into compliance. It is important to note that a country may be placed on the Priority Watch list or the Watch list even when it is in compliance with all the requirements of the TRIPS agreement, the major international treaty regulating global intellectual property rights.

The USTR 2007 Special 301 Report, released in late April 2007, examined the intellectual property rights rules provided by 87 countries. Although the 2007 report mainly focused on IPR protection in China and Russia, the report placed 12 countries on its Priority Watch List. Included in these are China, Russia, Argentina, Chile, Egypt, India, Israel, Lebanon, Thailand, Turkey, Ukraine, and Venezuela. In addition to these, 30 other countries are placed on the Watch List. Paraguay is deemed a Priority Foreign Country – a country whose policies and laws have the greatest adverse impact on the US – and the USTR continues to closely monitor Paraguay’s compliance with bilateral treaties and agreements with the US.