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TRIPS Agreement as an Instrument for Cross Retaliation and the WTO Rules

TRIPS Agreement as an Instrument for Cross Retaliation and the WTO Rules

Friday, September 14, 2007

An alternative for Brazil in case of non-compliance by the USA in the appellate decision on the cotton suit

Prepared by Maristela Basso and Edson Beas of the Institute for Trade and Development Rights (

This text analyses the viability of the Trade Related Aspects of Intellectual Property Rights (TRIPS ) agreement as a general retaliatory instrument to be used by developing nations. Failure on the part of industrialized nations to implement their obligations as ruled by WTO decisions/agreements, and consequently affecting market access, has a detrimental impact upon developing nations, and in this case Brazil.

Introductory Note

• The outcome from the Dispute Settlement Body (DSB) is not always what is hoped for by the developing nations.

• The criticized TRIPS Agreement could become an interesting, innovative and efficient instrument for effective resolution of commercial litigation involving industrialized and developing nations, especially when considering the omnipresent character of intellectual property, whether in rich or less developed nations.

• Central to the proposed solution using TRIPS is that developing nations may disrespect their TRIPS Agreement obligations just as their trade partners are not complying with WTO trade agreements and rulings, and commercial retaliation seems inefficient. The great advantage of using TRIPS in retaliation is its plausibility, effectiveness and legality, and the socially acceptable effect that this solution could generate. Instead of transferring to society the onus of litigation by way of over-taxing imported products from the target retaliation county, society will benefit, for example in greater access to medicine, culture, entertainment and information.

1. TRIPS can be used as an efficient retaliatory instrument

1.1 The Effectiveness of retaliation — Commercial retaliation [taxes on imports for instance] inflicts immediate losses on the target party but doesnÕt help the retaliating party; it generally leads to decline of well being in retaliating nation.

1.2 The credibility of retaliation by developing nations assumed great compromises in the mid-1990s with protection of intellectual property rights. TRIPS confers great benefits to developed nationsÕ businesses in the pharmaceutical, biotechnology, information technology, software, and music arenas. It also advantages companies with famous, valuable brands. It was these sectors that negotiated TRIPS during the GATT Uruguay Round. Consequently, non-compliance with TRIPS obligations could inflict considerable loss to these sectors.

1.3 Targeting provisions and "potential victims" — TRIPS is a desirable tool since retaliating country can inflict loss only upon the target nation that doesnÕt respect and comply with WTO decision. Brazil could suspend IPR with the USA. The proportion of patent rights suspended is a question, as is the duration of the suspension. In terms of getting good results from this action, the more the cost is to the sector for loss of intellectual property rights, theoretically the more pressure there would be [in the target country] to comply with a WTO ruling.

2. The difficulties of using TRIPS as a retaliatory tool.

2.1 The private nature of intellectual property rights; the company has its own property rights, a private American firm. Brazil signed the TRIPS agreement and then made it law, respecting all IPR manufactured in Brazil.

2.2 The uncertainties and transitory nature of suspending intellectual property rights — Internal market needs to be ready to meet demand for products affected by the suspension. Suppliers who provide products when IPR are suspended will need to halt production and marketing once the target nation complies with the relevant WTO ruling (the challenge is to meet demand only during time TRIPS is suspended, while not hurting the providing industry).

2.3 WTO Rules on cross retaliation — The WTO Accord for Dispute Resolution treats standards and procedures in its Article 22. Under article 22 the DSB allows nations that win a dispute to request authorization to suspend application of concessions of other accords such as GATT, GATS or TRIPS. The decision over which accord to suspend is made solely by the nation requesting authorization (i.e. Brazil). Requests to WTO for cross retaliation means the dispute involved one agreement (GATT) but retaliation will involve another (TRIPS). WTO can reject requests for cross retaliation.

3. The architecture of retaliation — ways to overcome the problems and challenges. If retaliation is well planned difficulties with accords and agreements can be overcome.

3.1 The private nature of intellectual property rights IPR are private and implemented by local legislation, particularly in countries where international rights arenÕt automatically enforced by internal policy regulation. National policy must reflect TRIPS obligations. It must be made clear that the retaliating nation is acting completely within the rules and agreements and that national legislation comports with and enforces those agreements.

3.2 The uncertainties and transitory nature of suspension of intellectual property rights.

4. Suggestions for amending the Industrial Property Law — Law 9279/96

The amendment would prepare Brazil to request approval from the WTO in order to retaliate or cross retaliate, by suspending IPR for the target country, should such action become necessary.

Key Issues: