Developments have been moving fast in Brazil regarding the possible
first-ever WTO-sanctioned cross-retaliation against intellectual
In November 2009, the World Trade Organization (WTO) gave Brazil the formal go-ahead to impose sanctions
on U.S. imports after
previous WTO rulings found that the U.S. government spent too much on
subsidies for cotton farmers and on an export credit guarantee
program. The WTO arbitration panel designated up to $829 million in
permissable damages against the United
States. Brazil took the first step toward
retaliation on March 8, 2010 when it issued a list of increased tariffs on 102
goods, amounting to $591 million dollars. This list included, for example, a
50% tariff on cars with small engines, a 22% tariff on bar code scanners, and a
100% tariff on cotton and cotton products. These higher tariffs could
go into effect within 30 days, unless the Brazilian and U.S.
governments reach a last-minute accord.
This left about $238 million for intellectual property-related retaliation,
which is the second target of the Brazilian government. This IPR list was to be
issued on March 23, but came out a few days early, on March 12 -- this
document was more of a concept paper, not specific regulatory measures.
The March 12 resolution on IPR is, however, very expansive in scope. It
outlines 21 possible ways to suspend intellectual property
protection for certain products that are protected by IP in Brazil.
For example, possible measures that could be developed range from prematurely
ending patents' and copyrighst' term of protection, granting compulsory
licensese for patents on medicines and copyrights, suspending parallel imports
of certain products, adding higher fees for the registration of IPR (including
copyright registration not currently required for foreign works) in Brazil and
taxing certain royalty payments. These proposals were subject to a
20-day public comment period (comments due April 5 in Brazil).
Suffice it to say, rights holders, both in the U.S.
are very concerned about the potential adverse impact of any such retaliation
against IP-protected goods and services there.
Not surprisingly, Brazilian officials have been quoted as defending their
actions: Brazilian officials have said that contrary to what happens
with direct retaliation, the retaliation against intellectual-property rights
would tend to reduce the cost of goods imported from the U.S.; "For final
consumers, this measure could reduce prices and costs in as far as there may be
a suspension in payment towards patents," said Brazilian Foreign Trade
Secretary Lytha Spindola. (source: Wall Street Journal, March 15, 2010).
Brazilian officials have indicated that they are not yet certain which subset
of measures they will choose to implement, or even how those resulting measures
will be implemented in practice.
On April 6, both governments announced that they had agreed on a path
toward a negotiated settlement with Brazil over the cotton
dispute. In brief, this involved a three baskets of steps affecting
agricultural products and rules that the U.S. agreed to take
immediately. Following implementation of these initial steps, both
governments agreed to continue to engage on these issues, with a view
to agreeing on a process by June 2010 that will allow them to reach a
mutually agreed solution to the WTO cotton dispute. As for first steps,
if the U.S. completed
certain steps by April 22, Brazil
would postpone possible retaliation. On April 21, USTR
announced that a Memorandum of Understanding was signed, and Brazil agreed
to postpone possible retaliation another 60 days. This gives both sides a
short breathing period to evaluate the situation and work towards a negotiated
solution. To be clear, however, potential cross-retaliation
against IPR is not "off the table." Cross-retaliation against
IPR remains a viable countermeasure, sanctioned by the WTO, that
Brazil still can invoke
against the U.S.
if a solution to the cotton dispute is not swiftly resolved.
View the Press
Release from the Office of the United States Trade Representative