India Continues to Stay in Priority Watch List of USTR’s Special 301 Report

On World IP Day 26th April, the USTR released its annual “Special 301” Report on the state of intellectual property protection and enforcement in US trading partners around the world. The report, which is annual exercise for the US, reviewed more than 100 trading partners. Out of this 27 of them figure in the “Priority Watch” List or “Watch” List. 

For India it is the same story once again as it continues to figure in the “priority watch list” along with Russia, China, and five other countries. The “priority watch list” indicates that US IP stakeholders have significant concerns regarding IP protection, enforcement, and market access in these countries. Consequently, these countries will be subject of particularly intense bilateral engagement during the coming year.

While the USTR report acknowledges India’s efforts/actions in addressing certain issues with trademark infringement investigations and pre-grant opposition proceedings, but numerous long-standing concerns remain. These include inadequate IP enforcement, including high rates of online piracy, an extensive trademark opposition backlog, and insufficient legal means to protect trade secrets.  Among other things, India still needs to fully implement the WIPO (World Intellectual Property Organisation) Internet Treaties and to ensure that copyright statutory licenses do not extend to interactive transmissions.

The report claims that India’s overall IP enforcement remains inadequate. The US’ major complaints against India include potential threat of patent revocations, procedural and discretionary invocation of patentability criteria. Besides, patent applicants continue to confront long waiting periods to receive patent grants and excessive reporting requirements. The report also pointed out India’s high customs duties on IP-intensive products such as ICT products, solar equipment, medical devices, pharmaceuticals, and capital goods.

Section 3(d) of the Indian Patents Act has always been a major bone of contention between the US’ pharma majors and Government of India. The report states that the US would continue to monitor the restriction on patent-eligible subject matter in Section 3(d) and its impacts. Pharmaceutical stakeholders also express concerns as to whether India has an effective mechanism for the early resolution of potential pharmaceutical patent disputes.

Further, the report raises concerns on India’s not so effective system for protecting against the unfair commercial use, and unauthorized disclosure, of undisclosed test or other data generated to obtain marketing approval for pharmaceutical and agricultural chemical products.

India remains home to several markets that facilitate counterfeiting and piracy, as identified in the 2023 Review of Notorious Markets for Counterfeiting and Piracy (Notorious Markets List). Given the scale and nature of the problem, the US urges India to adopt a national-level enforcement task force for IP crimes.

Besides patent, the report raises concerns of copyright holders on high levels of piracy, particularly online. The Section 31D of the Indian Copyright Act, which provides statutory licenses for broadcasting sound recordings, literary and musical works, to “internet or digital broadcasters”, lacks predictability. The report calls for need to amend the Indian Copyright Act to fully implement the WIPO Internet Treaties and bring India’s domestic legislation into alignment with international best practices.

The outcomes of the “Special 301” review are watched keenly by the US’ companies and the patent holders, particularly from pharma and tech sector. It provides an opportunity to put a spotlight on foreign countries’ laws/policies/practices that fail to provide adequate IP protection and enforcement for US inventors, creators, brands, manufacturers, and service providers. Often the observations of “Special 301” report also influence the investment decision of US companies in overseas markets, every country therefore lobbies hard to impress US with the action taken to improve their IPR regime.

For India this has been the status for the last many reviews, despite extensive bilateral engagement on IPR through MoU and annual Trade Policy Forum. As India eyes significant investment from US companies in tech-intensive sectors that include medical devices, defense equipment, energy etc., it has been trying hard to satisfy US concerns on India’s IPR enforcement mechanism. However, if we look at the report of past years, United States only acknowledges India’s effort on improving its IPR enforcement regime but never obliged by removing its name from the “priority watch” list.

In the latest report, there are seven countries under the “priority watch” list. It is worthwhile to notice that out of these seven countries except Chile all are non-FTA partners of US. One can easily draw the inference that US is perhaps using this report as a tool to force countries to sign FTA with TRIPs plus provisions. While all US’ FTAs have very ambitious IPR chapter, India has always opposed this approach. In fact, IPR was one of the major reasons the two countries couldn’t move ahead with bilateral investment treaty (BIT) talks after few initial rounds of negotiations. For similar reason India also opted out from “trade pillar” of Indo-Pacific Economic Framework (IPEF) agreement.

Deep Kapuria is the Chairman of The Hi-Tech Group of Companies comprising The Hi-Tech Gears, The Hi-Tech Engineering Systems, The Hi-Tech e-Soft, and Novus Hi-Tech Robotic Systemz. The Group has manufacturing, R&D and engineering facilities in India, Canada and USA. He is Chairman of Global Innovation & Technology Alliance (GITA – a PP project with Dept. of Science & Tech. Gov. Of India). He is the Past Co-Chair of Digital Economy and Industry 4.0 Task Force of B20, 2018 Argentina and Past Co-Chairman, CII National Committee on International Trade & Trade Policy.

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