Analysing the TRIPS Agreement in the Context of Compliance Theory

The Characteristics of the Accord

According to the model of compliance presented in Chap. 2, the characteristics of the specific accord may affect the prospects of compliance with it. Thus, it is crucial to consider the TRIPS Agreement itself before judging China’s compliance with its intellectual property obligations under this accord. The non-country-specific factors which may influence compliance with the TRIPS Agreement should be considered under various categories: the perceived equity of the obligations, the precision of the obligations, provisions for obtaining scientific and technical advice, reporting requirements, provisions for other forms of monitoring, the secretariat, and other incentives and sanctions.

The perceived equity of the TRIPS Agreement is in some doubt. As discussed above, negotiations over intellectual property rights within the GATT system were protracted and involved serious compromises on the part of the developing countries in return for concessions in other areas of trade negotiations. During the TRIPS negotiations, China participated as an observer and joined with the bloc of developing countries in the TRIPS negotiations. Fourteen of these developing countries, including China, submitted a draft text concerning intellectual property in May 1990 (Negotiating Group on Trade- Related Aspects of Intellectual Property Rights 1990). Unlike the three rival drafts submitted by the US, Japan and Switzerland respectively, the developing countries’ draft emphasised the “need to take into consideration the public policy objectives underlying national systems for the protection of intellectual property, including developmental and technological objectives” (Negotiating Group on Trade-Related Aspects of Intellectual Property Rights 1990). This draft also emphasised that signatories should not have recourse to unilateral measures in the event of any dispute. However, the draft was heavily criticised for providing “a wide degree of latitude” to governments with respect to legislating on standards and for providing levels of protection seen as insufficient by the developed countries (Negotiating Group on Trade-Related Aspects of Intellectual Property Rights 1990b).

It was clear after the rival drafts had been submitted that tensions still existed between the objectives of the developed countries and those of the developing countries within the TRIPS negotiations. In 1991, one developing country commented that they “continued to believe that the situation of the negotiations fell far short of addressing the special needs and problems of developing countries” (Negotiating Group on Trade-Related Aspects of Intellectual Property Rights including Trade in Counterfeit Goods 1991). Therefore, it is clear that throughout the negotiating and drafting process, there were concerns amongst the developing countries that their interests and concerns were being overlooked. As a result, there may still be a lingering perception that the final Agreement is not fair as it favours the interests of industrialised nations over poorer members. If some members do hold this perception, this may decrease the likelihood of their full compliance with their TRIPS obligations.

The precision of the TRIPS Agreement is almost certainly an area of some doubt. This is not helped by the nature of the TRIPS Agreement itself, which is a minimum standards agreement. This means that each member must provide protection of at least the standard provided for in the agreement, but is free to decide exactly how to implement the specific provisions. In this minimum standards nature, it is similar to a European Union directive. The minimum standards nature of the TRIPS Agreement is provided by Article 1, which states:

Members shall give effect to the provisions of this Agreement. Members may, but shall not be obliged to, implement in their law more extensive protection than is required by this Agreement, provided that such protection does not contravene the provisions of this Agreement. Members shall be free to determine the appropriate method of implementing the provisions of this Agreement within their own legal system and practice. (World Trade Organisation 1994b)

The precision of the obligations contained within the TRIPS Agreement is also subject to the balance between substantive precision and judicial autonomy which is a result of the hard-fought negotiations during the drafting of the Agreement. For example, many of the Articles relating to enforcement provisions are couched in language which states that the judicial authorities should have the authority to grant a particular remedy but without further guidance on how this should be implemented. An example of this is Article 44, which provides that “the judicial authorities shall have the authority to order a party to desist from an infringement.” However, the exact process of granting an injunction, the evidence which must be presented in order for an injunction to be granted, or any remedies for breach of an injunction are not further specified. This vagueness of language may lead to disputes.

In general, the wording of the TRIPS Agreement has been condemned as “result-oriented” and vague. Many of the provisions require members to give judicial or other authorities the authority to do something, but these authorities are not then obliged to exercise this power (UNCTAD-ICTSD 2004, p. 576). This flexibility within the obligations, particularly contained in Part III of TRIPS, means that assessing a member’s compliance can be problematic.

For example, as stated above, Article 41 outlines the general obligations regarding enforcement procedures. Article 41(1) commits members to ensuring the availability of the specified enforcement procedures “so as to permit effective action against any act of infringement”. “Effective action” is not defined here and thus, there is considerable room for interpretation. It has even been stated that “any judgment about compliance should be objectively based on whether Members have made or not the required procedures available” (UNCTAD-ICTSD 2004). This test seems to be permissive; mere existence of the procedures seems to satisfy this obligation, regardless of how, or indeed if, the procedures are actually utilised.

The analytical index of the WTO offers interpretation and application for any provisions that have been interpreted in cases brought before the WTo (World Trade Organisation 2012). The formal interpretation available concerning the TRIPS provisions on enforcement includes, for example, guidance on the scope of “unwarranted delays” in Article 41(2) and the words “shall have the authority” in Article 42. As many subsequent Articles also use the wording “shall have the authority,” this interpretation is signalled to be of broader application than just to Article 42. In India-Patents (EC), India tried to claim that a generally available system was not required by the wording “shall have the authority” in Articles 42-8 (World Trade Organisation 1998). However, this argument was rejected by the panel who affirmed that “the function of the words ‘shall have the authority’ is to address the issue of judicial discretion, not that of general availability.” Therefore, although it has been argued that the mere provision of these procedures is sufficient, the outcome in this case would appear to suggest that compliance requires more; the procedures actually have to be available. To date there have been 34 disputes involving provisions of the TRIPS Agreement.⁴ Several of these disputes have involved legal arguments about the precise nature of the obligations and arise from the imprecise nature of these obligations. Therefore, the precision of the obligations in the TRIPS Agreement is in doubt, and this lack of precision may be a factor affecting compliance with the Agreement overall.

Turning to provisions for obtaining scientific or technical advice to assist in compliance, there are several provisions within the TRIPS Agreement which provide for technical assistance and cooperation to assist members to comply with their obligations. The main provision is contained within Article 67. Under Article 67, developed countries shall provide technical and financial cooperation in favour of developing and least-developed countries (LDCs):

Such cooperation shall include assistance in the preparation of laws and regulations on the protection and enforcement of intellectual property rights as well as on the prevention of their abuse, and shall include support regarding the establishment or reinforcement of domestic offices and agencies relevant to these matters, including the training of personnel.

This issue of technical assistance has been central to the agenda of the Council of TRIPS and has resulted in numerous initiatives, such as conferences and training seminars. It has also led to several joint initiatives between WIPO and the WTO; specifically, “in 1998, the joint initiative on technical cooperation to assist developing countries in meeting the deadline for implementation of the TRIPS Agreement and, in 2001, the same initiative targeted the least-developed country Members” (Gervais 2003, p. 354). Following the 2005 decision to extend the TRIPS transition period for least-developed countries until 1 July 2013, the two organisations also agreed to intensify their cooperation to facilitate TRIPS compliance from these members.⁵

In addition to the WIPO-run Cooperation for Development Program, the European Patent Office offers various programmes, the World Bank includes IP in their legal training programme and the WTO, UNCTAD and NGOs all offer support. In terms of bilateral support, the US Agency for International Development (USAID) “spends around a quarter of its annual budget on legal and regulatory training” (May and Sell 2006, p. 177). Therefore, it is clear that a variety of training programmes exist under the auspices of Article 67 in order to assist developing countries to comply with the TRIPS Agreement. Furthermore, as the changes necessary to comply with TRIPS require considerable resources, many developing countries rely on this assistance (May and Sell 2006).

However, it is clear from the wording of this provision that any such cooperation must be at the request of the developing country member and cannot be imposed by the developed country partner without mutually agreed terms and conditions. Therefore, this provision may not always allow for the necessary cooperation where it is perceived by the developing country member that the assistance offered is interference in its domestic affairs rather than helpful support. In addition, the training programmes and assistance offered have also been criticised for encouraging countries to adopt “TRIPS-plus” legislation, regardless of whether it is in the country’s best interests or not and for discouraging the use of autonomy or flexibility in the implementation permitted under TRIPS Agreement (May and Sell 2006). In other words, the assistance offered by developed countries may encourage recipients to model their IP system on the developed country which may not be a suitable model for emulation, particularly if it requires stronger protection than mandated by TRIPS. Furthermore, assistance offered may also breach the key TRIPS principle that each member is free to implement TRIPS provisions as they see fit. Thus, although assistance is available under Article 67 and many developing countries do need such assistance, this training and cooperation may not always benefit the developing country as intended. Indeed, it has also been claimed that despite the provisions for cooperation under Article 67, “in the years since the promulgation of the WTO treaty there has been little- if any- real effort by developed countries to meet the Article 67 obligation” (Lehman 2002, p. 12).

There is further provision under Article 69 for more general international cooperation. This article provides that members:

Shall establish and notify contact points in their administrations and be ready to exchange information on trade in infringing goods. They shall, in particular, promote the exchange of information and cooperation between customs authorities with regard to trade in counterfeit trademark goods and pirated copyright goods.

To comply with this provision, the WTO Secretariat established a list of contact points in the administration of members and the World Customs Organisation has established a database to facilitate the exchange of information regarding cross-border trade in goods which infringe intellectual property rights (Gervais 2003, p. 360). Overall, there are provisions within the TRIPS Agreement itself for assistance and cooperation regarding implementation of TRIPS provisions. However, there is some dispute over the effectiveness of some of these measures and in general, there is a perception that developed countries could do more to assist developing country members.

In terms of reporting, the main requirement is created by Article 63 of the TRIPS Agreement which concerns transparency. Article 63(2) of the TRIPS Agreement provides that members shall notify relevant laws and regulations to the Council for TRIPS “in order to assist that Council in its review of the operation of this Agreement.” Relevant laws and regulations can also include final judicial decisions and administrative rulings which pertain to the subject matter of the TRIPS Agreement (Article 63(1)). There are also further reporting requirements contained in TRIPS, such as the requirement to notify contact points under Article 69 or notification of certain options relating to national treatment under Article 3. The TRIPS Council may also ask for notification regarding a member’s involvement in cooperation under Article 67.

It is clear that the notification requirements arising from the TRIPS Agreement are not insignificant. For example, notifications of laws and regulations under Article 63 include: the texts of all relevant laws and regulations in their original language; translations into one official WTO language; a listing of “other laws and regulations” in a specific format; as well as responses to a checklist regarding the law and practice of enforcement (World Trade Organisation 1996, p. 4). However, the Council for TRIPS also recognises that the notification requirements may constitute a considerable burden for some members; consequently, “procedures were adopted to attempt to reduce the burdens for Members in preparing them as well as for the Secretariat in processing them” (World Trade Organisation 1996).

Therefore, the reporting requirements of the TRIPS Agreement may operate against full compliance despite some allowances made by the TRIPS Council. Although it is clearly necessary for members to inform the Council for TRIPS of laws and regulations affecting IP rights, some members, especially developing country members, may struggle to fulfil their reporting obligations, especially when combined with various other reporting requirements of the WTO. It may be necessary to offer further assistance to support some members in fulfilling these reporting requirements, such as the WIPO assistance with translation of laws and regulations into a WTO language for the purposes of Article 63.2.

Additionally, there are various bodies which monitor intellectual property standards internationally. The World Intellectual Property Organisation (WIPO) is one of the main organisations in the field of international intellectual property. WIPO’s strategic goals are: (1) to promote an IP culture; (2) to integrate into national development policies and programmes; (3) to develop laws and standards; (4) to deliver quality services in global IP protection systems; and (5) to increase the efficiency of WIPO’s management and support processes (WIPO 2015). Consequently, although the role of WIPO is not directly related to active monitoring of individual countries’ IP standards, the development of these standards indirectly incorporates a form of passive monitoring. Thus, the role of WIPO could be said to be a form of monitoring.

There are also a number of international intergovernmental organisations which are granted observer status at meetings of the TRIPS Council (World Trade Organisation 2016c). These organisations could also be informally seen as a form of monitoring of the operation of the TRIPS Agreement, although clearly their role is not to question an individual member’s compliance. Some of these organisations are:

• • Food and Agriculture Organisation (FAO)
• • International Monetary Fund (IMF)
• • International Union for the Protection of New Varieties of Plants (UPOV)
• • Organisation for Economic Cooperation and Development (OECD)
• • United Nations (UN)
• • United Nations Conference on Trade and Development (UNCTAD)
• • World Bank (WB)
• • World Customs Organisation (WCO)
• • World Intellectual Property Organisation (WIPO)

In addition to these organisations which hold formal observer status, the World Health Organisation (WHO), Joint United Nations Programme on HIV/AIDS (UNAIDS), the African Intellectual Property Organisation (OAPI), the African Regional Intellectual Property Organisation (ARIPO), the European Free Trade Organisation (EFTA) and the Cooperation Council for the Arab States of the Gulf (GCC) may all also observe TRIPS Council meetings either as ad hoc observers or on a meeting-by-meeting ad hoc basis (World Trade Organisation 2016c). Additionally, there are various bodies globally that may informally monitor the operation of the TRIPS Agreement through monitoring intellectual property protection and levels of counterfeiting and piracy. These bodies will be considered further under the category of the international environment below.

In terms of the relevant secretariat monitoring and enabling compliance, the Council for Trade-Related Aspects of Intellectual Property Rights (the Council for TRIPS) is formally established by the WTO Agreement. Article IV(5) establishes that the Council for TRIPS shall operate under the general guidance of the General Council, but with the power to create its own rules of procedure and subsidiary bodies as necessary (World Trade Organisation 1994, p. 11). Article 68 of the TRIPS Agreement further details the creation of the Council for TRIPS, which is responsible for monitoring the operation of the TRIPS Agreement. Article 68 states: “The Council for TRIPS shall monitor the operation of this Agreement and, in particular, Members’ compliance with their obligations hereunder, and shall afford Members the opportunity of consulting on matters relating to the trade-related aspects of intellectual property rights.” It is clear that monitoring members’ compliance with TRIPS “is the predominant task of the Council” (UNCTAD-ICTSD 2004, p. 744). However, as the wording of Article 68 implies, monitoring by the Council does not only relate to members’ compliance, but extends to the operation of the TRIPS Agreement in general.

The Council for TRIPS is also the forum where members can consult on matters relating to intellectual property. This provision that the Council shall provide members with a chance to consult over IP issues is intended to avoid the use of the formal dispute settlement process. The Council is also responsible for providing assistance in the event of any disputes and overseeing the review of legislation in member countries. One of the first tasks completed by the Council for TRIPS was the establishment of formal links with WIPO under Article 68, for ease of cooperation. The Council for TRIPS is also the body responsible for the review and amendment of the TRIPS Agreement, after the expiration of the one-year transitional period and every two years thereafter under Article 71. Thus, there are five main functions that the Council for TRIPS performs (World Trade Organisation 2016d), which could be summarised as monitoring, consultation, technical cooperation, review and negotiation on specific subjects, and the review of the TRIPS Agreement itself.

It is clear from the detailed annual reports submitted by the Council for TRIPS that the Council performs a significant number of important tasks to ensure the full implementation of the TRIPS Agreement. For example, the annual report for 2014 lists the activities carried out in three formal meetings of the Council (Council for Trade-Related Aspects of Intellectual Property Rights 2014). The Council took note of new notifications by members regarding new or amended legislation relevant to the TRIPS Agreement; continued with the process of reviewing the legislation of members, including Montenegro and Tajikistan; held briefings on the relationship between TRIPS and the Convention on Biological Diversity (CBD) and on non-violation complaints; reviewed technical cooperation efforts; and discussed intellectual property and innovation, amongst other issues. Overall, the Council for TRIPS evidently works hard to fulfil its role of monitoring both individual members’ compliance and the operation of the TRIPS Agreement in general. In addition, the Council plays a useful role in mediating between members, to try to avoid the use of the formal dispute resolution mechanism. Therefore, the role of the secretariat would appear to be a factor which encourages compliance.

Turning now to other incentives and sanctions, there are certain provisions in the TRIPS Agreement relating to least-developed country members. These provisions act in addition to the general clauses relating to technical and international cooperation outlined above. For example, under Article 66, in addition to granting the least-developed countries substantial transitional periods to comply with the TRIPS Agreement, Article 66(2) also provides that:

Developed country Members shall provide incentives to enterprises and institutions in their territories for the purpose of promoting and encouraging technology transfer to least-developed country Members in order to enable them to create a sound and viable technological base.

In theory, this provision should increase the incentives for least-developed countries to cooperate with the TRIPS regime as they will be entitled to significant assistance in terms of technology transfer from more developed members. However, in practice, transfers are not as frequent as the Article would suggest, as many members are reluctant to transfer their technology prior to the leastdeveloped partner enacting effective intellectual property protection.

With this reluctance in mind, on 19 February 2003, the Council for TRIPS adopted a decision that developed country members should make annual reports regarding their activities under Article 66.2 (Council for Trade-Related Aspects of Intellectual Property Rights 2003). This decision was prompted by the Ministerial meeting at Doha which had directed members to put in place a mechanism for ensuring the monitoring and full implementation of the obligations in Article 66.2. These annual reports should contain an overview of the incentives regime put in place, as well as information regarding the operation of these incentives, including details of technology transferred and recipient countries.

According to the minutes of the Council for TRIPS meeting which established the annual report mechanism to monitor Article 66.2, the proposal was well received by the developing countries. For example, the representative of Bangladesh said that:

Implementation of Article 66.2 was of prime importance to LDCs. Developing countries, and in particular LDCs, had assumed onerous responsibilities in the TRIPS Agreement. Article 66.2 was one of the few provisions in Uruguay Round agreements that provided LDCs opportunities to build up their economies, and thereby helped them to comply with TRIPS provisions. (Council for Trade- Related Aspects of Intellectual Property Rights 2003b)

It is clear from the comments of the Bangladesh representative that Article 66 is seen as highly significant for the developing countries. In fact, Article 66 is almost seen as “payback” for agreeing to some of the most burdensome obligations contained within TRIPS and could therefore be seen as one of the “carrots” offered in the negotiating process.

In contrast to these additional incentives available for complying with the TRIPS Agreement, sanctions for non-compliance are less clear. The Council for TRIPS does not have any power to impose sanctions for non-compliance; the role it plays is positive—to facilitate members’ compliance rather than identify offenders. Thus, the only route available to sanction non-complying members is through the WTO dispute resolution mechanism. Overall, although further incentives do exist to increase the likelihood of compliance, particularly the potential for technology transfer under Article 66(2), there are few coercive sanctions applicable to members that do not fully comply with their TRIPS obligations.

Overall, the various characteristics of the TRIPS Agreement itself may affect whether members fully comply with their obligations or not. The most problematic areas of the TRIPS Agreement overall are the perceived equity and the precision of the obligations contained within the Agreement. There is a general perception originating in the drafting process that the standards of protection embodied in the TRIPS Agreement protect the interests of developed country members, whilst preventing the economic development of developing country members. This perceived inequality clearly operates against compliance. The precision of the obligations is also in doubt; as TRIPS obligations are imprecise, compliance with them is difficult to measure, and thus countries may not do all that they should to comply with the accord. In addition, although the Council for TRIPS plays an important role in monitoring compliance, other monitoring provisions are largely absent. Moreover, the reporting requirements may be difficult for some members to comply with and the provisions for assistance and cooperation that exist may not be used as much as they should be.

Therefore, in relation to the TRIPS Agreement, the institutional framework as represented by the Council for TRIPS is sound, but the procedural framework in terms of available incentives, sanctions and monitoring varies in terms of promoting compliance. The features that most discourage full implementation of and compliance with the TRIPS Agreement are related to how the substantive provisions are actually written, namely the perceived unfairness and imprecision of the obligations. This may be a result of the negotiating process that led to the establishment of the TRIPS Agreement and the inevitable compromises that were made between the negotiating parties. Overall, there are certain characteristics of the TRIPS Agreement itself that may not encourage full compliance, particularly the perception that the provisions benefited certain members more than others and the imprecision of some of the provisions.