The United States is urging developing countries to prepare now to meet their obligations in the multilateral Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) when that agreement becomes fully binding on them in January 2000, two Office of the U.S. Trade Representative (USTR) officials say. USTR has had success so far in prevailing in TRIPS cases it has filed in the World Trade Organization (WTO) against developed countries already bound by the agreement. Even as USTR uses the TRIPS agreement and seeks to negotiate expansion of it, they say, the Special 301 trade law will also remain in use.

The two officials are Joseph Papovich, assistant U.S. trade representative for services, investment, and intellectual property, and Claude Burcky, director for intellectual property. They made their comments during an interview conducted May 5 by USIA Economics Writer Bruce Odessey.

Q: If piracy is a profitable business, why should countries outlaw piracy and enforce intellectual property laws?

Papovich: If a national government wants to encourage the development of the arts and sciences in its country, then it's a fairly well-established fact that one needs strong intellectual property protections.

Mark Twain made exactly that argument 100 years ago for why the United States needed strong intellectual property protection. He said: "A country without a patent office and good patent laws is just like a crab that can't travel any way but sideways or backways." In the late 1800s, Americans apparently were fairly freely copying the works of other countries' writers, but I think in retrospect most Americans involved in this area now see that as a mistake. Twain and other American writers campaigned successfully for strong intellectual property protection in the United States. Today's American writers and inventors continue to do so.

Q: What about the argument that intellectual property rights protection is a plus for attracting foreign investment?

Papovich: One of the things developing countries always say they want is the transfer of technology. They see that as the path to development; they need to have made available to them the most modern inventions in the developed world. Our reply is that the only way that will happen is if the inventors of such technology know that their inventions will receive the same kind of intellectual property protection that they receive in the developed world.

We know of many instances where U.S. companies keep their latest inventions off the market in developing countries because they do not want to have them unfairly copied. They make available instead older, off-patent technology, for which intellectual property protection is no longer available. So the message to developing countries is this: Provide strong intellectual property protection, and the most recent technology will come your way.

Q: How did the U.S. program for promoting intellectual property in other countries come about? How has it been working?

Papovich: In the 1980s the United States began facing chronic trade deficits, so our government undertook a rather intensive examination about how we should address these deficits. One of the things that became apparent was that we needed to emphasize exports of products for which we had a comparative advantage. The area of intellectual property, creations of the mind, is one in which the United States has a strong comparative advantage. It became apparent to U.S. policy-makers that potential U.S. exports were not being exported because people in other countries were copying, were counterfeiting these U.S. products.

So in 1988 the Bush administration and the U.S. Congress decided on a two-track approach to combating piracy and counterfeiting of our products. One track involved creating the so-called Special 301 program, through which we undertake an annual review of which countries deny adequate and effective protection of American intellectual property. The other track involved pursuing an international agreement on intellectual property that was binding and had enforcement provisions as part of the Uruguay Round trade negotiations in the GATT (General Agreement on Tariffs and Trade) that were beginning at that time. That was finally achieved when the Uruguay Round was concluded in 1994 with the TRIPS agreement (the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights).

We continue to use vigorously Special 301. Claude just led the annual review this year, the results of which were made public May 1. Simultaneously, we are aggressively pushing for full implementation of the TRIPS agreement. One thing that was disappointing in the outcome of the TRIPS negotiation was that developing countries were given five years before they have to meet most of the obligations of the agreement. That five-year period expires on January 1, 2000. We are pressing hard to ensure that developing countries are taking steps now to meet their obligations, to be fully in compliance with their obligations when January 1, 2000, arrives.

Q: It has been sort of a mystery to me how you make Special 301 decisions. For example, this year USTR announced initiation of WTO dispute-settlement proceedings concerning Greece and identified Paraguay as a priority foreign country. Yet Russia was not identified as a priority foreign country even though your report describes it as having pervasive piracy. How do you make those calculations, and do foreign policy considerations enter into them?

Burcky: The first thing to look at is the IPR (intellectual property rights) regime itself -- whether adequate and effective laws have been passed and the level of enforcement of those laws. Certainly, Russia has come a long way in changing its legal regime, but, as you point out, enforcement is a problem. And as a reflection of our concerns about enforcement and the parts of the legal regime that are still deficient, we elevated Russia to the priority watch list last year. We continue to work with Russia on enforcement and development of laws. To the extent countries make progress in between reviews, we reflect that in their status in the Special 301 announcement. Russia has just over the past year agreed to work with us on the enforcement issue; since we are making progress on this issue, no further action on Special 301 appeared to be warranted this year.

Paraguay, on the other hand, doesn't have adequate and effective copyright, patent, or trademark protection. Enforcement is totally lacking. And transshipment of pirated and counterfeited goods from Asia through Paraguay to the rest of Latin America is a tremendous problem. So because Paraguay has not made progress over the past several years in addressing that problem, the country was steadily elevated through the Special 301 lists and was eventually designated as a priority foreign country.

So we make these decisions based on the regime as we see it and the progress that the country is or is not making to address the problems that we have identified.

Q: Does it also matter how much the piracy affects U.S. business?

Burcky: The industry submissions that we get every year estimate the losses that a particular industry is suffering, so the higher the losses the higher the priority, certainly.

Q: Is China the country where piracy costs U.S. business the most?

Papovich: Yes, I think that's true.

Burcky: Yes, and Russia is a close second.

Papovich: Mexico is near the top of the list. Who else are some of the big ones?

Burcky: Bulgaria until recently.

Papovich: It's a strange thing. People will ask, How can a smaller country like Bulgaria or Paraguay really be that much of a thorn in the side of our intellectual property industry? Their markets are small. But what happens is they export all over their respective regions, all over Eastern Europe in the case of Bulgaria and all over Latin America in the case of Paraguay.

Q: How does U.S. enforcement compare with that in other countries? For example, you can walk around the corner and you'll find guys selling t-shirts with blatant copyright violations, and they've been doing it for years.

Papovich: There's going to be some piracy and counterfeiting; there's no getting around that. In most instances we ask other countries to do what we do -- to have laws that prohibit this kind of behavior and an effective judicial process for acting against those who would break those laws. It's impossible to police every instance of that, but the mechanism for policing must be there.

I thought your example about the street vendors would include the selling of pirated copies of videos. This was occurring here in Washington, D.C. -- but now is not. The reason is that the Motion Picture Association of America, upon discovering that these videos were for sale, persuaded the local police to conduct raids run not so much against the retailers but against the manufacturing and distribution facility in Maryland. The trademark owners apparently haven't decided to pursue their rights against the t-shirts these guys continue to sell. The point is that we want the rights holder to have the mechanism available to get relief if he or she so desires. You can do that in the United States. In other countries, it's not so easy.

Q: Are the problems in developing countries related more to passing adequate laws or to enforcing laws already passed?

Papovich: Getting a country to enact a law is fairly straightforward and relatively uncomplicated. Enforcement is much more complex. Many developing countries' enforcement systems, judicial systems, civil and criminal justice systems are much less developed than in the developed world. It can be difficult to get prompt enforcement. Police and judges may or may not be corrupt. Even if everyone is honest, there often are not enough police or judges. So it's hard to get raids run. It's hard to get your case heard promptly. It's not that countries don't want to protect intellectual property. They just don't have the infrastructure in place to provide the kind of prompt justice that you get in most developed countries.

Q: How well has the TRIPS agreement been working so far?

Papovich: Well, so far so good, but, as I said earlier, most of the obligations in the countries that matter the most to our intellectual property industry don't kick in until January 1, 2000. The TRIPS agreement came into full effect for developed countries on January 1, 1996. Most developed countries have pretty good laws. It's the developing world that we're more concerned about. So the jury's still out. But I think one has to say that we have used the TRIPS agreement very aggressively even against developed countries who are not meeting their obligations -- I think 10 or so cases.

Burcky: Yes, it's 10 now with the Greece case.

Q: What's the record of U.S. cases on TRIPS in the WTO? How many have been decided? How many are still pending?

Papovich: Most of the cases have been settled out of court, so to speak. The first case we brought was against the Japanese on sound recordings, and that was settled before it had to go to a formal panel. The next case we brought was against the Portuguese, where provisions of their patent law were TRIPS-inconsistent; that was settled too. Basically, "settled" means that the country changed its law or its practice to be in compliance with TRIPS.

The only case that went through a panel process so far involves India. The TRIPS agreement has a 10-year transition before patents must be provided for pharmaceutical products. Yet there's a provision requiring, immediately on January 1, 1995, that countries taking advantage of that 10-year transition have a place -- called a mailbox -- where applications can be filed to preserve their novelty. Neither Pakistan nor India had a mailbox. So we brought cases against them simultaneously. Within a few months the Pakistanis agreed that we were right, and they took the legislative steps necessary to create a mailbox. So that case was withdrawn. The Indians, on the other hand, disagreed with our decision. So we went to panel; went through the whole process. The panel found that we were right. The Indians appealed the decision, which is their right. And the appellate body affirmed the decision that we were right. Now the Indians have to take steps to comply. They're doing that now.

We haven't lost any of our cases, but there are a few that are still outstanding.

Q: Is the kind of IPR problems we have with Europe and Japan different from the kind of problems we have with Paraguay and India?

Papovich: Certain developing countries have no IPR laws at all -- no law protecting patents, no law protecting trademarks, or very elementary versions. In the developed world, countries tend to have sophisticated laws, and the problems that we have might be with respect to relatively narrow interpretations or with respect to inadequate enforcement.

Take the case with Sweden and Denmark, for example. Our software industry needs the right to conduct surprise searches of the premises of a corporation if the corporation is using copies of U.S. software without authorization. Denmark and Sweden feel that the right to have surprise searches is limited to criminal cases, not civil cases. The U.S. copyright industry prefers to bring civil complaints because it has a hard time persuading prosecutors to consider software piracy comparable to murder, robbery, and such. Yet software companies can't make their case against these corporations unless they can have these surprise searches. So that's the dispute we're having with Sweden and Denmark. It's a rather sophisticated issue compared to the absence of a copyright law. We have broader problems of inadequate enforcement in Greece and Italy.

Q: What's ahead in negotiations? What kind of further agreements does the United States want in intellectual property?

Papovich: In the multilateral context, there are a couple of things. One question is whether to incorporate into the TRIPS agreement the recent agreement at the World Intellectual Property Organization that electronic transmissions are protected under copyright. Another is how we can better protect biotechnology products under the provisions of the TRIPS agreement?

One of my predecessors said the TRIPS agreement provides intellectual property protection for what amounts to a snapshot of the state of intellectual property as of 1990. In 1990 nobody was sending e-mails, documents, or software over the Internet. Now they are. If we want TRIPS to be a state-of-the-art agreement, then we have to think about incorporating into it the world's latest developments.