Plugging the leak in s. 1498: coercing the United States into notifying patent owners of government use.

• Author: Rushing, Steven

ABSTRACT

When the United States uses a patent for public, noncommercial purposes, it is required under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) to provide notification to the patent owner. However, the United States has never implemented legislation to conform with its obligation and is therefore in violation of TRIPS. This Note argues that by permitting obvious and smaller violations--such as lack of notification--to fester, the United States has left the door open for other members of the World Trade Organization (WTO) to weaken the United States' overall trade policy. Members could likely accomplish this goal by first bringing a dispute over obvious U.S. violations to the WTO in order to build a growing sentiment against the United States. If the United States wishes to stay ahead of such risks and continue using current trade policies, it should amend its laws to correct smaller violations such as the lack of notification, and thus prevent possible attacks from rival members.

TABLE OF CONTENTS I. INTRODUCTION II. BACKGROUND A. U.S. Law on Government Use of Private Patent B. TRIPS III. WHY MEMBERS WILL ENFORCE THE NOTIFICATION REQUIREMENT A. Nonexistent Discovery Under U.S. Law B. Necessity of Demanding Compliance with TRIPS C. Need for a Strong Dispute Settlement Process IV. USING WTO VIOLATIONS TO EFFECT POLICY CHANGE: WHY THE UNITED STATES NEEDS TO AMEND [section] 1498 BEFORE A WTO MEMBER BRINGS A DISPUTE A. Major U.S. Trade Policy Complaints 1. Special 301 2. Manipulation of TRIPS Through Trade Concessions B. Likely Plaintiffs in a Dispute Against the United States C. Understanding Consequences: The Grim Outlook for U.S. Trade Policies Without a Notification Requirement V. THE U.S. DEFENSIVE STRATEGY A. Worldwide Government Use and Compulsory License Statutes 1. The United Kingdom 2. China 3. The European Union 4. North American Free Trade Agreement (NAFTA) B. Predispute Initiation: Comply with TRIPS by Amending [section] 1498 C. Postdispute Initiation: Arguments to Distinguish the Law VI. CONCLUSION I. INTRODUCTION

"Whenever ... a patent of the United States is used ... by or for the United States without license ... or lawful right to use.... the [patent] owner's remedy shall be ... recovery of his reasonable and entire compensation...." (1) But is the United States obligated to disclose the use of the patent? What if the United States were to use a foreign defense contractor's patent and deny the patent owner the ability to learn of such use on national security grounds? What would the international community do in retaliation? This Note argues that while there is no domestic obligation to disclose government use to a patent owner, the United States is in violation of the 1994 World Trade Organization (WTO) Agreement on Trade-Related Intellectual Property Rights (TRIPS). (2) Accordingly, the United States should amend its domestic law before other countries have the opportunity to use the violation to weaken U.S. trade policy in key enforcement areas.

TRIPS is an agreement on international intellectual property (IP) rights that has strong roots in U.S. history. (3) Similar to U.S. law, TRIPS takes an aggressive approach to the enforcement of patent rights both domestically and internationally. (4) When a WTO member's (5) patent laws do not comply with TRIPS, the member risks litigation through a dispute process. The resolution and final outcome of a dispute can include a forced change of law or trade sanctions. (6) However, the real danger to a violating country is the threat of a dispute itself. Rival nations can intimidate a violating country into accepting a range of trade-related agreements that disadvantage the violator and increase the wealth of the instigator. (7) The United States has employed this tactic long before TRIPS came into existence and even helped draft the agreement to ensure a continuing legal way to accomplish its goals. (8)

For the United States, this strategy of strong-arming competitors is a double-edged sword. The United Stat.es has vigorously enforced its IP rights against violating members through a variety of questionable tactics. (9) The world has taken notice of the hypocritical behavior of the United States, as many nations refuse to abide by the same agreements it forces on others. Indeed, rival countries loathe the bargaining power of the United States through trade embargos and tariffs, the unilateral Special 301 powers of the U.S. Trade Representative, and the disregard of TRIPS compliance while demanding implementation from others. (10)

The idea of U.S. exceptionalism has reigned on the world stage in the past century. (11) There is only a matter of time though before competitor nations employ a strategy of using U.S. noncompliance with TRIPS to gain a trading edge on the world's largest exporter. Together with a growing global economy, the United States cannot operate under the assumption that it is immune from the demands of other nations and is the sole hegemonic nation. If members collectively act against the United States, the power and position it has enjoyed will surely decline. However, major complaints against the United States in the past have proven unwise. Thus, a more nuanced plan of attack is likely.

This Note argues that the United States must comply with the agreement it helped to foster and notify patent owners when it uses a patent. If the United States cannot see the wisdom in complying with TRIPS then the rest of the world will not only enforce compliance, but also likely use the obvious violation to attack U.S. policy. After briefly discussing current U.S. law on government use and analyzing the relevant international agreements, Part II determines the United States is in violation of TRIPS. The importance of enforcing the notification requirement is discussed in Part III, including why patent holders, especially foreign patentees, have virtually no chance of discovering use without notification; why developed countries have a stake in bolstering the enforcement of TRIPS; and why the international community needs to highlight the legitimacy of Dispute Settlement Understanding (DSU). (12)

In Part IV, the central thesis is developed by examining the major complaints against the United States--the Special 301 powers employed by the Trade Representative, threats of TRIPS violations in exchange for trade concessions, and failing to meet international standards while requiring compliance. By initially determining a member similar to the European Union will be the plaintiff in a dispute against the United States, this Note concludes the first attempt to alter U.S. trade policy will likely be made through a relatively smaller contest. While the prudent action would be for the United States to amend its law regarding notification requirements to comply with TRIPS, if it refuses, the international community will be incentivized to force implementation. After all, a ruling against the United States can be employed in a grander scheme to weaken U.S. policy. The lack of a notification requirement is small enough to be solvable by the United States, yet large enough to alter policy in the defense sector. This would be a deceptive and unfortunate blow to U.S. interests. It could also force the United States to write a less favorable amendment to the law with the greater attention from members.

In Part V, the defensive strategy for the United States is explored. This begins with an overview of similar statutes and treaties involving other countries that the United States can use as a template. To that end, this Note concludes that to stay one move ahead of competing nations, the best strategy for the United States is to proactively amend its law. Through adding a notification requirement without international pressure, the United States can minimize damage to defense contractors, among others, while delaying disputes on other issues. However, if the United States procrastinates and does not amend the law, this Note lays out possible arguments for its use in an eventual dispute. Finally, Part VI concludes that for the United States to continue using TRIPS as an effective means of controlling international IP standards, it needs to proactively fix compliance violations on its own terms. By rewriting the law to fix the lack of notification, the United States can define terms such as how and when a patent owner is notified while satisfying international obligations.

2. BACKGROUND

   This Part begins by introducing [section] 1498 and its place in U.S. law. It then introduces the TRIPS Agreement and concludes that while other countries are likely in compliance, the United States is clearly in violation of the Agreement.

   1. U.S. Law on Government Use of Private Patent

      Section 1498 allows the U.S. government to use a patent for public noncommercial reasons. The relevant version of the statute reads:

      Whenever an invention described in and covered by a patent of the United States is used or manufactured by or for the United States without license of the owner thereof or lawful right to use or manufacture the same, the owner's remedy shall be by action against the United States in the United States Court of Federal Claims for the recovery of his reasonable and entire compensation for such use and manufacture.... For the purposes of this section, the use or manufacture of an invention described in and covered by a patent of the United States by a contractor, a subcontractor, or any person, firm, or corporation for the Government and with the authorization or consent of the Government, shall be construed as use or manufacture for the United States. (13) By requiring "reasonable and entire compensation" for the use of the patent, the United States has acknowledged it cannot take away a patent holder's right to reparation. (14) This is made possible because [section] 1498 requires the government to waive sovereign immunity...