SPEECH: Remarks from Senator Orrin Hatch at the Release of the 2014 GIPC International IP Index

Below are remarks by Senator Orrin Hatch (R-UT), Ranking Chairman of Senate Finance Committee, at the release of the 2014 GIPC International IP Index.

Thank you, Mark, for that kind introduction. And thank you for having me here today.   

Your invitation to keynote today’s event on the state of intellectual property protection around the world provides an exceptional opportunity to discuss one of the most important challenges facing the U.S. economy – how to effectively promote innovation and ensure that the fruits of that innovation are protected worldwide.

I am passionate about this topic, as most of you know.   

In my home state of Utah, I have personally seen a number of small start-up companies, founded on nothing more than an idea, grow and prosper both nationally and internationally because we took the necessary steps to protect their intellectual property. 

Today, more than half a million jobs and 67 percent of Utah’s exports are connected to intellectual property and, therefore, depend on strong intellectual property protections for their existence.   A similar story can be told in states across the country.

Innovators and artists are not only the foundation of our economy, but also our culture.

Our Founding Fathers believed intellectual property to be so fundamental to America’s future prosperity that they explicitly granted Congress the constitutional authority to protect it.

And they were right. 

So many great American stories are rooted in, and made possible by, laws designed to reward innovation and protect an individual’s intellectual property.  Entire industries and generations have been influenced by intellectual property – from Henry Ford’s innovative assembly line, which made automobile ownership possible for millions of Americans, to Walt Disney’s passionate vision to bring animation to life, which continues to bring joy to children around the world. 

Indeed, intellectual property protection is woven throughout the fabric of our nation. 

Intellectual property creates value for individuals and American businesses, and, in turn, these businesses create jobs, spur economic growth, and enrich our culture. 

It is a lesson that is too often lost on much of the developing world. 

The fact is, strong intellectual property rights is a tool of economic growth, not an impediment. 

It is a simple truth – countries that strengthen their intellectual property rights regimes enjoy economic benefits. They attract more investment, more technology transfers, increased innovation, and, ultimately, more prosperity for their citizens. 

Yet, despite these fundamental truths, intellectual property protections around the globe are continually at risk. 

Our economic and strategic competitors are well aware that the U.S. leads the world in innovation but, all too often, they fail to understand why. 

Instead of fostering policies to advance innovation, they seek shortcuts that undermine and even steal American intellectual property. 

The tools employed are numerous and sophisticated. 

They include: unfair standard-setting, burdensome regulations, and non-transparent reimbursement and licensing regimes.  All of these mechanisms are designed specifically to pry away some of the most innovative and productive parts of our economy. 

As today’s report notes, India is at the top of the list.  Indeed, India is the biggest battlefront we face in the fight to protect U.S. intellectual property rights abroad. 

In addition to localization policies that coerce American companies into transferring their technology, India also misuses its own intellectual property system in an effort to boost its domestic industries. 

Even the basic legal tenants of intellectual property are at risk in India.

The government of India has granted a compulsory license to its domestic industry so it can freely manufacture generic copies of a patented product merely because the product had not been “worked,” or manufactured, in India.  And India continues to arbitrarily invalidate legitimate patents held by U.S. companies by creating an extraneous requirement for patentability that’s out of step with the rest of the world. 

Worst of all, there’s nothing in India’s patent law that limits this to pharmaceuticals – jet engines or cell phones could be next. 

Protections for rights holders in India are still lacking and punishments for infringers remain weak.  As a result, India continues to be plagued by rampant piracy of entertainment and software and counterfeiting of consumer goods, and a climate generally unfriendly to investment.

Another front in this battle is in China, where the Chinese government is increasingly aggressive in trying to find ways to condition market access on the disclosure of trade secrets.  This is on top of the perennial problems we face with regard to China’s intellectual property rights regime. 

In the face of such aggressive behavior, the United States government must stand strong, using all of the tools at its disposal to counter these efforts. 

Strong enforcement of existing obligations is vital.  But, we also need to be pushing boundaries, constantly developing and negotiating international rules to counter new methods of intellectual property theft through new, high-standard trade agreements.

When it comes to intellectual property protection as part of U.S. trade policy, I am genuinely worried that the Obama Administration simply does not get it.  The Administration prides itself on enforcement.  But, when it comes to protecting our intellectual property rights around the globe I am increasing skeptical. 

Let me give you an example. 

Chile, a current Trans-Pacific Partnership country, has failed for years to meet its intellectual property rights commitments under our free trade agreement.  To me, this is a clear cut case, ripe for dispute settlement.  But rather than press our intellectual property rights in Chile, this Administration chose to expend our scarce government resources litigating labor issues in Guatemala. 

Unfortunately, this tendency to put intellectual property rights protection at the end of the line seems to be a pattern. 

Let’s just take a look at the implementation of our most recent free trade agreements. 

Here, the Administration selectively implemented those agreements, time and again choosing labor over innovation. 

Panama had to make statutory and regulatory changes to its labor laws before the administration would even submit that free trade agreement to Congress for approval. 

In the case of Colombia, the administration required the Colombians to make changes to their labor regime that weren’t even required by the free trade agreement before sending the agreement to Congress. 

Contrast this with the case of the Korea Free Trade Agreement, where the Obama Administration allowed the agreement to enter into force knowing that the Koreans were not in compliance with their obligation to create an independent review mechanism for pricing and reimbursement of pharmaceuticals and medical devices.  In my view, they squandered the leverage of entry into force, and now we are faced with reduced leverage to bring Korea into compliance.

I do not want to see these mistakes repeated.

That is why the Trade Promotion Authority bill that Chairman Baucus and I recently introduced with Chairman Camp contains strong new oversight mechanisms that will help ensure full implementation and effective enforcement of our trade agreements.

The TPA bill also calls for robust intellectual property rules, building on the strong intellectual property standards found in the prior 2002 Trade Promotion Authority law.  This includes requiring that trade agreements meet the high standards found in U.S. law, and requiring countries to fully implement the TRIPS Agreement, particularly the enforcement obligations.  It also includes requiring the elimination of price controls and reference pricing, which are used by many countries to deny full market access to innovative pharmaceuticals and medical devices. 

Our TPA bill goes further than the 2002 law by calling for an end to government involvement in intellectual property rights violations, including piracy and cyber theft of trade secrets.  This is the first time TPA legislation has addressed these issues. 

The bill also ensures that governments limit the unnecessary collection of trade secret information and protects any information that they do collect from disclosure. 

Our legislation further directs the administration to ensure that regulatory reimbursement regimes that make pricing and reimbursement decisions are transparent, provide procedural fairness, are non-discriminatory, and provide full market access for innovative pharmaceuticals and medical devices. 

The bill also calls for the elimination of measures that require U.S. companies to locate their intellectual property abroad as a market access or investment condition. 

Finally, the bill includes an expanded capacity building objective directing the administration to work with U.S. trading partners to strengthen, not only their labor    laws, as was provided for in 2002, but also their intellectual property rights laws.

Put simply, for any future trade agreement to win my approval, it must meet these standards. 

However, as it stands today, the Obama Administration has a long way to go. 

For example, in the Trans-Pacific Partnership, or TPP, negotiations, the Administration is hesitant to push for adequate intellectual property rights protections, and I’m concerned this will undermine our ability to get a good deal. 

After years of failing to even table text reflecting U.S. law for the term of protection of biologics, the administration has now begun advocating a “differential approach.”  Under this approach, certain TPP countries would be allowed to settle for a lesser standard of protection for intellectual property rights based on these countries’ “individual circumstances.” 

At this point, it is altogether unclear what criteria the administration will use to determine whether a country qualifies for this differential treatment and whether or how such a country might graduate to a full standard of protection. 

I am extremely concerned about the precedent this approach will set for future trade negotiations. 

I have no doubt that countries around the world, including India and China, will be noting which TPP countries are allowed to get by with substandard intellectual property rights protections. 

On top of this, it was recently reported that the administration is scaling back its ambitions on disciplines for the pricing and reimbursement for U.S. pharmaceutical products below the standards set by Korea Free Trade Agreement.  

Think about this for a moment.    

Over the last few decades, intellectual property has grown in importance to the U.S. economy and, at the same time, the rest of the world has intensified their efforts to undermine and steal U.S. Intellectual property.  Yet, rather than building on our agreement with Korea to establish even stronger provisions in the TPP to protect U.S. innovation, the Administration is backsliding and undermining these standards in the negotiations. 

At the same time, the administration continues to push forward a liberal social agenda on labor, the environment, and product specific carve-outs that will only serve to undermine our ability to get a good deal.

At best, this reflects misplaced priorities on the part of the administration.  At worst, it is a dereliction of their duty to protect U.S. property interests.   

There also remains some serious question as to whether the administration will even pursue an intellectual property rights chapter in our negotiations with the European Union. 

This is incredible.

The U.S. has the highest intellectual property rights standards in the world. 

Intellectual property is our competitive advantage.

It is our economic future. 

Once you set the precedent of substantively carving out intellectual property rights from a trade agreement, every other country we negotiate with is going to demand the same treatment. 

It’s just common sense, something that seems to be lacking with this administration. 

I hope we are able to get our TPA bill approved soon. 

But whether that happens in the near term or not, the administration and our trading partners better take note of the standards articulated in our bill, because it is those standards by which I – and a number of my colleagues – will judge any agreement.    

I’m often asked about the current prospects for getting our TPA bill passed.  Indeed, I’m sure many of you in this room are wondering about that very issue today. 

Let’s be clear.

If Congress does not renew TPA, the administration’s ability to conclude high-standard trade agreements – whether it’s TPP, T-TIP, or any other agreement – will be greatly diminished.  And, that’s probably an understatement.  In truth, it will be virtually impossible for the administration to conclude these agreements without TPA. 

That being the case, you’d think they’d have an interest in getting our TPA bill – or any TPA bill – passed through Congress as soon as possible. 

However, so far, I’ve been underwhelmed at this administration’s support of our bill and extremely disappointed with the efforts they’ve made to get Democrats in Congress on board. 

The US Trade Representative declined to even testify at the recent hearing we held in the Senate Finance Committee to examine the role of TPA in U.S. trade policy.

And, in last night’s State of the Union address, the President barely mentioned his trade agenda.  He certainly didn’t call on members of his own party to set aside their differences and support renewing TPA. 

This administration needs to do better. 

The bill cannot get through Congress without bipartisan support.  That’s just a fact. 

Republicans, by and large, support renewing TPA because we support free trade.  It’s the Democrats that need to fall in line.  And, to put it bluntly, they’re never going to fall in line unless the President shows more leadership on this issue. 

If TPP and T-TIP are to succeed, the time to act is now. 

The President must actively engage with Congress and work with us to advance TPA as soon as possible. 

He must also show that he is serious about creating jobs and increasing economic growth by advancing a trade agenda that promotes strong standards for the protection of intellectual property rights.   

Protecting American innovation is not optional, it is fundamental to our nation’s economic future.  It is more important than ever for the United States to assert a bold trade agenda that paves the way for our innovators to flourish overseas. 

Our Founding Fathers recognized the role that intellectual property protection would play in our future and they have been proven right.  As our innovators continue to advance and compete globally, now, more than ever, the United States must heed the wisdom of our Founders and bring this lesson to the forefront of our trade policies.  It is through strong protection of innovation that we developed as a nation, and it is through the protection of innovation that our nation will continue to thrive in the international arena.

Thank you for all that you do to help us spread this vital message across the globe.  Working together, we will make a difference.

Thank you.  God bless you all. 

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