While the differences between India and the U.S. over intellectual property rights (IPR) have threatened to derail economic relations, it should be possible to sort them out through discussions. One encouraging sign is the decision of the U.S. Trade Representative (USTR) not to designate India a Priority Foreign Country (PFC) on account of alleged “deterioration” in its environment for IPRs, in its Special 301 report released on April 30. That label is reserved for the worst IPR offenders. As a follow-up to such a designation, the U.S. could have imposed trade sanctions such as withdrawing preferential tariff for India’s exports. In an election year India would most likely have retaliated through anti-dumping duties or tariff hikes on U.S. imports. The consequent allround deterioration in economic relations between the two countries is something both countries can ill afford. However, while there has been a distinct softening of the U.S. position, India still faces the possibility of a downgrade later this year. The USTR, which has retained India on the less-serious Priority Watch List, says it will conduct a mid-year review. India’s response has been measured. The Commerce Secretary has said that India will not be a party to any unilateral investigation by the U.S. but is prepared to discuss the matter on a bilateral basis.

The disagreement between the two countries over IPRs goes back to 1994 when at the Uruguay Round of trade talks India and a few developing countries managed to incorporate a few flexibilities in the TRIPS (Trade Related Aspects of Intellectual Property Rights) Agreement. However, since 2005 when India incorporated patent protection into its domestic laws, it has made use of the flexible provisions only twice. In March 2012, a compulsory licence was issued to an Indian manufacturer of a cancer drug whose patent-holder, the German multinational Bayer, had priced it well beyond the reach of a majority of Indian patients. The second case involves the denial of patent on a drug to the Swiss company Novartis on the ground that only incremental innovation was involved. The 2006 decision of the Indian patent office was upheld by the Supreme Court in 2013. Clearly it is not these two instances but the possibility of other countries emulating India that has rattled big pharma, whose influential lobbies have been in the forefront of the moves against India’s IPRs regime. The IPRs regime itself is fully compatible with the rules of the World Trade Organisation. It is noteworthy that at the hearings before the U.S. Trade Commission three of the world’s largest corporations claimed that they faced no significant IPR violations in India. On a strong wicket, India should present its case effectively to counter the pressure from the U.S. lobbies.

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