International IP Index - Global Intellectual Property Center

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Feb 10, 2016 - all major forms of IP rights—from patents, copyrights, and trademarks to trade secrets .... and Softwar
The U.S. Chamber International IP Index “Infinite Possibilities”

February 10, 2016

Contents 1. Foreword 2. Executive Summary 3. Overview of the GIPC International IP Index Fourth Edition 4. Building Paths to Innovation and Competitiveness through IP Rights 4.1 Using the Index to quantify the economic benefits of IP rights: Background and rationale 4.2 Statistical analysis in the fourth edition of the Index: Increasing empirical focus on the contribution of IP rights to innovation and competitiveness 5. Overall Findings 5.1 The Global IP Rights Environment in 2015 5.2 The Fourth Edition of the Index: Overall Economy Scores 5.3 Category 1: Patents, Related Rights, and Limitations 5.4 Category 2: Copyrights, Related Rights, and Limitations 5.5 Category 3: Trademarks, Related Rights, and Limitations 5.6 Category 4: Trade Secrets and Market Access 5.7 Category 5: Enforcement 5.8 Category 6: Membership and Ratification of International Treaties 5.9 Additional Layers of Analysis—Comparing Economy Performance on a Regional and Sector Basis 6. Applying the Index: Economy Overviews Introduction Algeria Argentina Australia Brazil Brunei Canada Chile China Colombia Ecuador France Germany India Indonesia Israel Italy Japan Malaysia Mexico

New Zealand Nigeria Peru Poland Russia Singapore South Africa South Korea Sweden Switzerland Taiwan Thailand Turkey Ukraine United Arab Emirates United Kingdom United States Venezuela Vietnam Annex 1: Abbreviations Annex 2: Methodology, Sources, and Indicators Explained Tables and Figures Table I: 4th Edition Index Economies by World Bank Region Table II: 4th Edition Index Economies by World Bank Income Group Figure I: 4th Edition Index Economies, Regional Comparison Figure II: Association between IP Protection and Access to Finance Figure III: Association between IP Protection and Number of Researchers in R&D Figure IV: Association between IP Protection and Researchers in R&D: Average Rates by Economy Group Figure V: Association between Patent Protection and Triadic Patenting Rates: Top 10 and Bottom 10 Economies Figure VI: Association between IP Protection and Access to the Latest Technologies Figure VII: Association between IP Protection and VOD and TV Streaming Penetration: Top 5 and Bottom 5 Economies Figure VIII: Association between IP Protection and Company Spending on R&D Figure IX: Association between IP Protection and Share of Workforce Employed in KnowledgeIntensive Services Figure X: Association between IP Protection and Share of Workforce Employed in KnowledgeIntensive Services by Index Scores Figure XI: Association between IP Protection and FDI: Case Study of the Life Sciences in Terms of Clinical Trial Activity

Figure XII: Index 3rd Edition versus 4th Edition, Economy Score, Bottom Half Figure XIII: Index 3rd Edition versus 4th edition, Economy Score, Top Half Figure XIV: Overall Total Score, Percent Available Score Index, 1st through 4th Editions, 2012– 16 Figure XV: Overall Total Score, Percent Available Score Index, Top 3 Economies from Original 11 Figure XVI: Overall Total Score, Percent Available Score Index, Middle 4 Economies from Original 11 Figure XVII: Overall Total Score, Percent Available Score Index, Bottom 4 Economies from Original 11 Figure XVIII: Overall Economy Scores, Top Half Figure XIX: Overall Economy Scores, Bottom Half Figure XX: Scores, Category 1: Patents, Related Rights, and Limitations Figure XXI: Scores, Category 2: Copyrights, Related Rights, and Limitations Figure XXII: Scores, Category 3: Trademarks, Related Rights, and Limitations Figure XXIII: Scores, Category 4: Trade Secrets and Market Access Figure XXIV: Scores, Category 5: Enforcement Figure XXV: Scores, Category 6: Membership and Ratification of International Treaties Figure XXVI: Regional Mean and Median Score, Index 4th Edition Figure XXVII: Life Sciences Indicators, Percent of Possible Available Score, Index 4th Edition Figure XXVIII: Creative Content Indicators, Percent of Possible Available Score, Index 4th Edition

1. Foreword Welcome to the 4th edition of the U.S. Chamber of Commerce International IP Index. Innovators are everywhere. Wherever and whenever imagination meets inspiration to meet a need, innovation takes place. Intellectual property, as the empirical analysis in this report demonstrates, provides a critical infrastructure that moves innovations from great ideas to tangible, real-world solutions, and makes them broadly available to others, everywhere. Just as every country needs a system of roads—or, as is often the case today, a digital network— to bring goods and people to market, so every country at every level of development needs an intellectual property system to bring ideas to market as products. And yet, as this report also shows, such infrastructure remains regrettably underdeveloped in much of the world, effectively denying innovators in those countries the opportunity to contribute their best ideas for their own and the world’s advancement. Accordingly, we offer the U.S. Chamber Index to innovators and policy makers everywhere as a guide to re-creating in their own countries the infrastructure for innovative success. It is a proven model that has led to many if not most of the technological breakthroughs that expand, enhance, and extend the lives of people around the world today. In these pages, that model is explained and outlined, and 38 key global economies are measured against it so that the opportunities for progress are clear. The U.S. Chamber of Commerce stands ready to work with every country that is ready to embrace this model and empower its innovators to change the world for the better.

2. Executive Summary Intellectual property (IP) fuels the creation of knowledge-based economies. By providing a legal infrastructure through which ideas can become products, robust IP systems foster innovation leading to economic growth, job creation, and sustained competitiveness in global markets. The U.S. Chamber’s International IP Index provides economies with a comprehensive roadmap to harnessing the benefits that robust IP systems provide. The 4th edition of the Index, Infinite Possibilities, assesses the legislative, regulatory, and administrative strength of the IP environment in each country measured, providing domestic policy makers with a clear set of priorities for the development of an innovative knowledge economy. These transformations in turn create limitless possibilities to attract investment and fuel economic competitiveness. The Index maps the IP environment in 38 economies around the world, collectively accounting for nearly 85% of global gross domestic product (GDP). Each economy’s score is based on 30 indicators spread across six categories—Patents, Copyrights, Trademarks, Trade Secrets, Enforcement, and International Treaties. The 4th edition of the Index also includes an updated measure on physical counterfeiting to provide a more accurate estimate of the estimated level of counterfeiting in the economies benchmarked in the Index. A score approaching 30 is indicative of a highly robust IP system. The 4th edition evaluates IP policies in 38 economies, with the addition of 8 new economies in the 2016 Index: Algeria Argentina Australia Brazil Brunei Canada Chile China Colombia Ecuador France Germany India

Indonesia Israel Italy Japan Malaysia Mexico New Zealand Nigeria Peru Poland Russia Singapore South Africa

South Korea Sweden Switzerland Taiwan Thailand Turkey Ukraine United Arab Emirates United Kingdom United States Venezuela Vietnam

Key Findings The Index includes many examples of positive momentum in economies that have recognized the infinite possibilities provided by robust IP protections and invested in a stronger innovation ecosystem:  The Canadian government extended the copyright term for sound recordings to 70 years and implemented ex officio authority for customs officials.  The Indonesian government introduced implementing regulations for the 2014 Copyright Act, which create an online notification system for rights holders to request action against alleged infringing websites.  In Israel, a new Index economy, 2014 reforms significantly enhanced the environment for patent protection. In particular, Israel has introduced a five-year term of patent restoration for biopharmaceuticals and regulatory data protection for submitted clinical data.  Malaysia’s IP environment has improved gradually over the past four years, resulting in a cumulative increase in the country’s score. As a TPP (Trans-Pacific Partnership) negotiating partner, the IP standards within the agreement―once ratified and implemented―will further strengthen Malaysia’s IP environment.  The United Arab Emirates introduced a series of measures to deter TV piracy and combat the production and trafficking of counterfeit goods. Other economies still have ample room to improve their IP environment in order to unleash the benefits of intellectual property.  Broadly, a number of economies, including Brazil, China, India, Indonesia, and Russia introduced or maintained policies that tie market access to sharing of IP and technology. Such forced-localization policies tend to undermine the overall innovation ecosystem and deter investment from foreign IP-intensive entities.  Copyright protection remains a particular challenge for many high-income economies in Europe, including Italy, Poland, Switzerland, and Sweden, particularly due to the absence of policies to more effectively combat online piracy.  The Australian High Court reversed the earlier Federal Court ruling in D’Arcy v. Myriad, which weakened the patentability of isolated-genetic material and biotechnology inventions.  In Ecuador, another new Index economy, the government continues to actively pursue an innovation policy that in large measure bypasses the importance of IP protection including the active use of compulsory license for biopharmaceutical products.  While the United States excels at promoting IP-intensive industries in many ways, enforcement related to trade secrets theft and counterfeit seizures remains a relative weakness, causing the United States to be ranked fifth in enforcement. The 4th edition of the Index not only measures the relative strengths of each economy’s IP environment but also demonstrates the benefits associated with those strengths. The Index includes 6 new correlations on the relationship between strong IP rights and socioeconomic benefits, as well as updated statistical information for 14 of the correlations from the Index’s 3rd edition. The new correlations include:

     

Access to finance: Economies with robust IP regimes are more likely to attract venture capital and private equity funding. High-quality human capital: Economies with favorable IP protection possess on average 2.5 times more research and development (R&D)-focused personnel within their workforces. Foreign direct investment attractiveness: Economies with robust IP systems receive on average a 45% higher Standard and Poor’s credit rating than economies whose IP systems lag behind. Inventive activity: The top 10 economies in the Index exhibit patenting rates more than 30 times greater than the Index’s bottom 10 economies. Advanced technology markets: People and firms in economies scoring above the median level of the Index are 30% more likely to enjoy access to the most recent technological developments. Streamlined and enhanced access to creative content: Advanced and easy-access delivery of streaming services is 3 times greater in economies scoring above the median level of the Index, than in those scoring below the median, while access in the top 5 economies is up to 25 times greater than in the lowest 5.

Conclusion Countries with a legal framework underpinned by robust IP protection create infinite possibilities to foster economic growth and global competitiveness. The Index serves as a roadmap to help economies achieve this goal, in turn nurturing the growth of new and emerging innovative hubs around the world.

3. Overview of the U.S. Chamber International IP Index Fourth Edition Now in its 4th consecutive year, the Index remains a unique empirical assessment of the state of national IP environments in the world. A truly global measure, the latest edition of the Index covers 38 economies that together constitute over 85% of 2014 estimated world GDP.1 Through the Index’s 6 categories and 30 indicators measuring the availability and enforcement of IP measures, the Index provides a deep and detailed analysis of individual economies’ national IP environment. The Index covers all major forms of IP rights—from patents, copyrights, and trademarks to trade secrets and membership of international IP treaties. Together with a dedicated focus on understanding and assessing the active enforcement and application of IP rights, the Index provides a clear roadmap for both policy makers and businesses seeking to assess risk to one of their most valuable forms of capital—intellectual property— when operating overseas. As with the third edition, this Index also contains a Statistical Annex that seeks to use the Index’s findings of the Index to help explain the benefits of promoting IP. Specifically, this Annex shows the strong correlation between the strength of an economy’s national IP environment and economic activity across a range of indicators. Whether it is encouraging R&D; creating more high-value, knowledgebased jobs; or generating more cutting-edge innovation or access to venture capital, the evidence gathered in this Annex shows clearly that economies that protect IP tend also to see greater benefits in all these other measures of economic activity. What’s new in the fourth edition? First published in 2012, the inaugural edition of the Index mapped the national IP environment in 11 economies using 25 indicators to assess the availability and enforcement of IP rights. The Index has since grown considerably, with the number of economies mapped more than tripling and the number of IP rights indicators examined having increased by 20% during the same time period. As in previous years, the fourth edition of the Index contains a number of new features and additions that enhance its utility and precision. Of particular importance is the increase in the number of economies mapped and the development and use of a new Global Measure of Physical Counterfeiting. Growing the Sample Size This year, the Index has been expanded to 38 economies, with 8 new economies added—Algeria, Brunei, Ecuador, Israel, Italy, Poland, Sweden, and Venezuela. As with previous editions, the new additions are a mix of developed economies and emerging markets from across the world.

1

World Bank (2014), GDP Ranking 2014 (September 2015 update), World Development Indicators.

As Table I shows, the Index includes economies from all major regions of the world and is truly a global measure. Using World Bank definitions of regional geography, most of the economies sampled are from Asia, Latin America, and Europe and Central Asia.2 Table I: Fourth Edition Index Economies by World Bank Region3 Asia Latin America Africa and Europe and and the Middle East Central Asia Caribbean Australia Argentina Algeria France Brunei Brazil Israel Germany China

Chile

Nigeria

Italy

India

Colombia

South Africa

Poland

Indonesia

Ecuador

UAE

Russia

Japan

Mexico

Sweden

Malaysia

Peru

Switzerland

New Zealand

Venezuela

Turkey

Singapore South Korea

North America Canada United States

United Kingdom Ukraine

Taiwan Thailand Vietnam Source: World Bank (2015)

2

Note that the World Bank’s geographic classifications have been somewhat amalgamated: Middle East and North Africa has been combined with Sub-Saharan Africa; and East Asia and Pacific has been combined with South Asia. See World Bank (2015), “Country and Lending Groups,” . http://data.worldbank.org/about/country-and-lending-groups 3 Note that the World Bank does not include Taiwan in its classification or its databank. However, based on current per capita income levels, Taiwan would be classified as a high-income economy. World Bank (2015), “Country and Lending Groups,” .

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Figure I shows the relative size of each region mapped to the others and to the total of 38 economies. Figure I: Fourth Edition Index Economies, Regional Comparison 5%

34%

27%

Asia LatAm & Carib. Africa and ME Europe and Central Asia North America

13% 21%

In addition to regional and geographic diversity, the Index also contains economies from a broad spectrum of income groups as defined by the World Bank. Table II provides an overview of all 38 economies sampled in the Index’s 4th edition according to income group as defined by the World Bank. Table II: Fourth Edition Index Economies by World Bank Income Group4 Lower-middleUpper-middleHigh-income High-income income economies income economies economies OECD members India

Algeria

Argentina

Australia

Indonesia

Brazil

Brunei

Canada

Nigeria

China

Russia

Chile

Ukraine

Colombia

Singapore

France

Vietnam

Ecuador

Taiwan

Germany

Malaysia

UAE

Israel

Mexico

Venezuela

Italy

Peru

Japan

South Africa

New Zealand

Thailand

Poland

Turkey

South Korea Sweden Switzerland United Kingdom

Source: World Bank

(2015)

United States

4

Note that the World Bank does not include Taiwan in its classification or its databank. However, based on current per capita income levels, Taiwan would be classified as a high-income economy. World Bank (2014), “Country and Lending Groups,” . http://data.worldbank.org/about/country-and-lending-groups

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As is discussed in more detail in section 5, the increase in the number of economies mapped in the Index means that the evidence base about the state of the global IP environment is now even stronger. Economies are forming distinct clusters and groupings and it is possible to make stronger judgments comparatively as well as absolutely on the availability and enforcement of IP rights. Updated Counterfeiting Measures The global counterfeiting industry is vast and comprehensive. Counterfeit products— from goods and merchandise to banknotes, industrial parts, and medicines—circulate across the globe, causing immense human and economic damage. Counterfeit automotive parts are often of very poor quality, which can lead to vehicle failure. Fake batteries and chargers may explode and catch fire. Counterfeit clothes and alcohol contain excessive levels of dangerous chemicals. Fake toys contain hazardous and prohibited chemicals and detachable small parts.5 Counterfeit medicines may contain dangerous and even contaminated substances and often do not contain an active ingredient at all.6 All of the above, taken together or individually, constitute a serious health and safety risk. Counterfeiting also results in a stagnating effect on economies. For example, the U.S. Government Accountability Office (GAO) has found that counterfeiting has slowed the growth of the U.S. economy due to decreased innovation and loss of trade revenue, which has also led to higher employment rate.7 For the G20 economies, it is estimated that global counterfeiting has resulted in the loss of 2.5 million jobs and more than 60 billion Euro in tax revenue losses.8 Yet for all the real damage counterfeit goods and products do, detailed estimates of the scale of physical goods counterfeiting are still hard to come by. As has been noted in previous editions of the Index, a number of challenges hinder any attempt to measure piracy and counterfeiting. First, illegal activities are inherently difficult to measure and quantify with a high level of accuracy. Out of necessity, estimates will be based on variables such as physical seizures and surveys. This is particularly the case for online piracy.

Europol, Counterfeit products, 5 https://www.europol.europa.eu/sites/default/files/publications/counterfeitproducts.pdf; European Commission, “Too Good to Be True: The Real Price of Fake Products,” April 19, 2013, http://ec.europa.eu/growth/tools-databases/newsroom/cf/itemdetail.cfm?item_id=6589. World Health Organization, “Medicines: Spurious/Falsely-Labelled/ Falsified/Counterfeit (SFFC) Medicines,” Factsheet No. 275, May 2012, http://www.who.int/mediacentre/factsheets/fs275/en/. United States Government Accountability Office, “Intellectual Property: Insights Gained from 7 Efforts to Quantify the Effects of Counterfeit and Pirated Goods in the U.S. Economy,” Testimony before the Subcommittee on Oversight and Investigations, Committee on Energy and Commerce, House of Representatives, July 9, 2013, http://www.gao.gov/assets/660/655781.pdf. Zurich Insurance Company, “Counterfeit Products: New Risks in Global Value Chains,” November 2014, p. 9, https://www.zurich.com/_/media/dbe/corporate/docs/whitepapers/risk -nexus-november2014-counterfeit-products.pdf.

6

8

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Second, studies of rates of piracy and counterfeiting tend to focus on either one specific economy (say the United States or China) or the global economy (providing a total estimate for the entire world). The result is a relative paucity in the number of studies that measure and compare levels of piracy and counterfeiting with a sample of economies sufficient enough to make large-scale comparisons empirically robust. Last, because measures of piracy and counterfeiting are inexact, estimates of their economic impact can vary widely depending on the methodology and data samples used.9 Up until this edition, the Index has relied on two main sources for estimating levels of piracy and counterfeiting in each of the sampled economies: The Organisation for Economic Co-operation and Development’s (OECD) General Trade-Related Index of Counterfeiting of Economies (GTRIC-e), which measures the relative rates of physical counterfeiting for 134 economies (the latest year for which data are available is 2009);10 and Software piracy rates compiled by the Business Software Alliance (BSA) (2014 being the latest survey).11 These sources are both robust and internationally recognized measures. Furthermore, they cover a large sample of economies, providing a sound basis for both crosseconomy comparisons and long-term use within the Index. Both the BSA software piracy rates and the GTRIC-e Index are numerical measures that can be transposed into two respective mathematical scores, for indicators 21 and 22, respectively. Still, there are caveats with the use of these measures, in particular the GTRIC-e.

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These difficulties of measuring piracy are particularly pronounced for online piracy. No comprehensive studies exist that measure and compare rates of online piracy for a large sample of countries. Consequently, the indicators measuring piracy and counterfeiting in the Index are primarily based on physical piracy and counterfeiting, with the data from the BSA being based on both physical and digital software piracy. Nevertheless, a number of academic and industry-supported studies measure rates of online piracy and its economic impact either on a global basis or for a few large economies. For example, a 2011 study commissioned by NBCUniversal and produced by Envisional found that 23% of global Internet traffic was estimated to be infringing in nature. Similarly, a 2011 report by Frontier Economics estimated the total value of counterfeit and pirated products in 2008 and forecast for 2015 to be $455–$650 billion and $1,220–$1,770 billion, respectively. Out of this total, digitally pirated products were estimated at $30–$75 billion in 2008 and forecast to be $80–$240 billion in 2015. Furthermore, this report found that online piracy in the United States made up a large share of this digital piracy figure. For 2008, the report estimated that $7–$20 billion worth of digitally pirated recorded music was consumed in the United States, with an additional $1.4–$2 billion of digitally pirated movies also consumed. Also, the vast majority of academic papers and economic analyses have found that online piracy and file sharing has had a negative impact on media sales, including music. For details, see Envisional (2011), Technical Report: An Estimate of Infringing Use of the Internet (Cambridge, 2011), p. 2; Frontier Economics (2011), Estimating the Global Economic and Social Impacts of Counterfeiting and Piracy (London, 2011), pp. 56–8; and Smith, M.D. and Telang, R. (2012), Assessing the Academic Literature Regarding the Impact of Media Piracy on Sales (Social Science Research Network, 2012). 10 OECD, (2009), Magnitude of Counterfeiting and Piracy of Tangible Products: An Update, pp. 5–6. 11 Business Software Alliance (BSA), (2014), The Compliance Gap: BSA GLOBAL SOFTWARE SURVEY, June 2014.

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First, the GTRIC-e Index measures the relative rates of physical counterfeiting and is based on international trade statistics and customs interception data. Consequently, the GTRIC-e does not take into account or measure “domestically produced and consumed products or non-tangible pirated digital products.”12 The practical result is that a number of economies that have relatively low levels of customs interception of counterfeit goods yet high levels of domestically produced counterfeit goods or high levels of online piracy rank quite well within the GTRIC-e. Clearly, this may not be an accurate reflection of their overall piracy and counterfeiting environment. For example, the rank of Argentina, Brazil, Chile, and Mexico in the GTRIC-e Index is slightly misleading because in other measures—not least the BSA software piracy estimates—all four economies have high rates of piracy. Furthermore, economies such as Argentina have high rates of physical goods piracy. For example, the La Salada street market outside Buenos Aires is estimated to be the largest informal market in Latin America with a significant portion of goods sold being pirated.13 More generally, the informal economy in Argentina has been estimated by the local chambers of commerce as being worth over 3% of GDP.14 Second, the GTRIC-e is quite dated. Last updated in 2009, the underlying customs data and survey it relies on date back to the mid-2000s. As a result, there is a question of whether it is still a reliable indicator of overall levels of physical goods counterfeiting. To address this challenge, the 4th edition of the Index now incorporates a new proprietary Global Measure of Physical Counterfeiting. The measure has been developed by the U.S. Chamber of Commerce and Pugatch Consilium to provide a new global measure of physical trade-related counterfeiting. It provides a total and per economy estimate for each of the 38 economies included in the Index of rates of physical trade-related counterfeiting. The full methodology, data used, and explanation of the modeling are provided in the Annex. The results of the Global Measure of Physical Counterfeiting are used as the basis for a given economy’s numerical score for indicator 21 and replaces the OECD GTRIC-e as the source for this indicator. The BSA software piracy rates remain the source and determinant for economy scoring for indicator 22.

12

Ibid. pp. 1–2. The Economist (2014), “Stall Stories,” January 25, 2014. 14 Dialogo (2011), “Argentina: Black Market Targeted by Authorities,” July 20, 2011. 13

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Uses and users Covering over 85% of the estimated world GDP, the Index gives a clear indication of the global state of the availability and enforcement of IP rights in the world today. The Index gives governments and policy makers insight on how their individual national IP environment is perceived by the world’s leading knowledge and technology-intensive companies and how it compares to other markets around the world. As is discussed in the following section on the relationship between IP rights and economic development, this is particularly important as more and more economies consider further developing their own innovative and creative industries, seek greater investment, and promote their economic and cultural development. The Index can be used to understand either the overall score or assessment of a given economy’s national IP environment (including all major IP rights such as patents, copyrights, trademarks, and trade secrets) or gain an in-depth and detailed overview of industry- or sector-specific IP rights such as regulatory data protection, patentability of computer-implemented inventions, and legal measures deterring online copyright infringement. The Index’s methodological construction allows users to compare and benchmark economies either for the total national IP environment or for specific forms of IP rights or sectors. In this sense, the Index is an open-ended tool that allows users to extract specific indicators and develop unique, tailored measures of particular industries or sectors across a set of economies.

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4. Building Paths to Innovation and Competitiveness through IP Rights A recurring theme throughout each edition of the Index has centered on the question of why IP protection matters for economies, governments, businesses, and the public at large. The third edition included a special section dedicated to examining this question empirically, using existing literature as well as the Index itself. This discussion uncovered a number of insights that together underscored the significant economic benefits (or costs) that are linked to the level of IP protection provided in a given economy. In the fourth edition, this section augments and builds on the previous analysis to sharpen the image of how IP rights support (or deter) national efforts to build innovative and competitive economies, address emerging challenges, and enable access to the benefits of a global marketplace. 4.1 Using the Index to quantify the economic benefits of IP rights: Background and rationale In the context of an ever-increasing body of evidence from the OECD, World Intellectual Property Organization (WIPO), and numerous other organizations that establish a link between improvements to the IP environment and many different economic benefits—from foreign direct investment (FDI) and technology transfer to job creation and economic developmenti the Index provides unique insight into these relationships. First, utilizing the Index to measure IP protection provides a nuanced and comprehensive measure of economies’ IP environments, enabling an even clearer picture of how IP rights relate to other economic variables. In addition, using the Index allows for the possibility of isolating IP rights specific to a sector or area of IP protection, and measuring their relationship with related economic activities. Looking at both the overall environment in an economy as well as specific areas within it sheds light on which types of IP protection matter most for specific types of economic activities and sectors of interest. The Index’s third edition used its scores to estimate the relationship between IP rights and different measures of economic benefits using correlation and regression analysis. Correlation analysis is a highly useful method for providing a picture of the links between different inputs and outputs on a statistical scale, and understanding the likelihood of two elements occurring together.ii In the context of IP rights, correlations enable an understanding and, to some extent, prediction of the relationship between various aspects of national IP environments and other economic activities. Complementing correlations, regression analysis reveals causal relationships between inputs and outputs.iii The third edition of the Index and its accompanying Annex examined a number of correlations between the Index scores and a wide range of general and sector-specific economic activities, from job creation and innovation to biomedical investment and access to creative content and services. The analysis went beyond looking at broad measurements of economic activity to measure tangible, deep-rooted benefits to economies that relate to IP rights, including:

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Economic development and growth of high-tech sectors: For instance, a strong link was found between IP rights and innovation—or actual production of knowledge-based and creative outputs. Patent protection in particular displayed a robust association with development and production of new technologies in a given economy. In addition, a significant relationship was found between IP rights and the sophistication and attractiveness of the business environment for foreign investors. Ability to address emerging national and global challenges: For example, IP rights demonstrated strong positive associations with FDI and levels of innovation in the biomedical and biotechnology fields—cornerstones of discovering and producing solutions to today’s challenges about access to healthcare, resource demand, and climate change. Similarly, the availability of ICT-based services and technologies, including the ability to provide wider and more in-depth public services, was also highly linked to IP protection. Access to modern-day conveniences and benefits of a global market for consumer goods, technologies, and creative content: The analysis also included several correlations that displayed strong positive associations between IP rights and access to digital and creative content as well as physical goods from all over the world via the latest devices and online platforms.

4.2 Statistical analysis in the fourth edition of the Index: Increasing empirical focus on the contribution of IP rights to innovation and competitiveness This section builds on the statistical analysis from the third edition, with the goal of enabling an even clearer picture of the economic benefits of strengthening IP rights. It does so in at least three major respects: Reflects the most up-to-date conditions and outcomes: The correlations in this section rely on the new 2016 Index scores, reflecting the current situation on the ground in every economy measured. They also utilize the latest available data on the economic benefits measured in the third edition, as well as data for the indicators added in this edition (see discussion below). Specifically, where available, all data used for the correlations in the third edition are updated. This means that the comparison and testing of the relationship between IP rights and the economic benefits examined here remains a pertinent and accurate assessment of the importance of IP protection. Expands the depth and clarity of the findings: In the 4th edition of the Index, the addition of 8 new economies increased the sample size by almost 30%. Thus, the data available to analyze the relationship between IP rights and related economic benefits is greatly enriched. Indeed, as with any scientific study, growth in the sample size only means a stronger evidence base for conducting statistical analysis and drawing conclusions from these findings. In this context, a trend is visible when looking at the same correlations from the 3rd edition using the enlarged sample of 38 economies: the findings of the relationship between IP rights and economic benefits are confirmed and strengthened. In fact, in several instances the relationship between IP rights and a given economic benefit is stronger than in the previous edition’s analysis, further substantiating the findings made. This is particularly true when considering the relationship between IP rights and the growth of factors for building homegrown innovative capacity and 17

competitive advantages in the fastest-growing high-tech sectors. For instance, the correlation between IP rights and R&D investment, particularly by the private sector, identified in the previous edition is stronger under the larger sample size. This finding confirms that economies that strengthen their IP environment tend to promote greater company-level spending on cutting-edge R&D—a crucial component for translating new technologies into concrete products. Similarly, an even more robust relationship than in the 3rd edition was identified between IP rights and job creation in knowledge-intensive sectors, reflecting the importance of strong IP protection, among other elements, for generating jobs and particularly within the highest-value segments of the economy. Widens the scope of the analysis to include additional benefits of IP protection: On top of updating the data and enlarging the sample size for the existing correlations identified in the third edition, the analysis in the fourth edition includes five new correlations. These correlations examine the relationship between general and sectorspecific IP rights and a set of indicators that reflect the fundamental conditions and activities that enable economies to create their own, bespoke paths to innovation and competitiveness. Indeed, the new correlations included in this edition represent a sample of the basic tools and building blocks that support the growth of advanced and internationally competitive economies from the ground up—and yet in a manner that reflects and is tailored to the specific needs, culture, and aspirations of a given economy. The new correlations in this edition suggest that IP rights play a highly important role in generating these tools and building blocks in individual economies. Moreover, IP protection should be strengthened as much as possible, rather than impeded, if economies seek to move up the global innovation value chain. Specifically, the five new correlations identify strong positive relationships between IP rights and:  Access to finance: Economies with robust IP regimes are more likely to attract venture capital (VC) and private equity funding compared with economies whose IP regimes lag behind. Having a healthy VC market that supports the rise of domestic high-tech sectors depends on the guarantee that nascent technologies integral to the growth potential and value of start-up companies will be protected from freeriding in the market. 

High-quality human capital: Economies that provide favorable IP protection possess, on average, 2.5 times more R&D-focused personnel within their workforces than economies with moderate IP regimes (those that fall within the middle third of the Index), which in turn have twice as many R&D researchers than economies whose IP environments require the most improvement. Placing increasing emphasis on innovation-enabling policies, including strong IP protection, promotes domestic capacity building in terms of human capital, particularly for innovative activities.

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Inventive activity: The top 10 economies in the Index exhibit patenting rates (in terms of triadic patents) more than 30 times greater than economies in the bottom 10 spots in the Index. The stronger the IP environment, the more likely economies are to create and possess a store of high-value inventions that serve as springboards for cutting-edge R&D initiatives and crucial levers for new local innovative firms.



Access to technology: Firms and people in economies that score above the median level of the Index are 30% more likely to benefit from access to the most recent technological developments compared with those in economies whose IP environments trail behind. Improving IP protection promotes wider availability of pioneering tools and platforms that enable advanced innovation and reflect a high-tech economy and society.



Streamlined and enhanced access to creative content: Advanced and easyaccess delivery of home entertainment through video-on-demand and streaming services tends to be available to triple the population among economies placing in the top half of the Index compared with economies in the bottom half. Strong IP protection, particularly of copyrights and related rights, encourages content providers to launch the latest platforms for accessing content, leading to greater availability of new and exclusive content from across the globe in a convenient and user-friendly manner.

The following subsections discuss the above five correlations in greater depth. They also present the results of three updated and expanded correlations from the third edition: IP rights and (1) R&D expenditure, (2) high-value job growth, and (3) biomedical FDI.

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A healthy IP environment increases economies’ ability to access venture capital Figure II: Association between IP Protection and Access to Finance Venture Capital & Private Equity Country Attractiveness Index score (standardized to 100), 2015

100 90

Correlation:

CA NZ

MY 80 IN

70

TH

60

VN 50

ID

ZA BR RU

AR EC NG

40

IL

CN CL TW TR AE CO

PL

JP

SG

KR

AU CH

GB DE SE

US

FR IT

MX

PE UA

DZ

30 VE

20 20

30

40

50

60

70

80

90

100

Index score, 4th edition, standardized to 100

Source: GIPC, IESE Business School/Groh et al (2015) Legend: AE – UAE, AR – Argentina, AU – Australia, BR – Brazil, CA – Canada, CH – Switzerland, CL – Chile, CN – China, CO – Colombia, DE – Germany, DZ – Algeria, EC – Ecuador, FR – France, GB – United Kingdom, ID – Indonesia, IL – Israel, IN – India, IT – Italy, JP – Japan, KR – South Korea, MX – Mexico, MY – Malaysia, NG – Nigeria, NZ – New Zealand, PE – Peru, PL – Poland, RU – Russia, SE – Sweden, SG, Singapore, TH – Thailand, TR – Turkey, TW – Taiwan, UA – Ukraine, US – United States, VE – Venezuela, VN – Vietnam, ZA – South Africa The Index scores exhibit a very strong association to economies’ attractiveness for venture capital as measured by the Venture Capital and Private Equity Economy Attractiveness Index.iv Economies maintaining robust IP regimes (scoring within the top third of the Index) are more likely to attract VC and PE funds compared to economies whose IP regimes lag behind (scoring within the middle and bottom thirds of the Index). Canada and Malaysia are outliers, with high VC attractiveness compared to their Index scores. Canada possesses a relatively sophisticated financial and banking environment that generally supports VC.v For its part, Malaysia has introduced specific initiatives promoting private equity in previously state-owned companies.vi Conversely, Italy exhibits relatively weak access to finance, despite its moderate IP regime, partly due to its slow recovery from the global economic crisis and instability within the financial system.vii

20

Robust IP protection encourages development of human capital

Researchers in R&D (per million population), 2012 or latest avaialble year

Figure III: Association between IP Protection and Number of Researchers in R&D 7000 IL

Correlation:

SG

6000

KR

5000

JP

SE

CA FR

4000

DE GB

NZ

US

RU

3000 2000 AR

1000

VE

0 20

IN TH 30

UA CN BR TR MX ZA CL CO 40

50

IT

PL

MY

60

70

80

90

100

Index score, 4th edition, standardized to 100

Source: GIPC, World Bank Legend: AR – Argentina, BR – Brazil, CA – Canada, CL – Chile, CN – China, CO – Colombia, DE – Germany, FR – France, GB – United Kingdom, IL – Israel, IN – India, IT – Italy, JP – Japan, KR – South Korea, MX – Mexico, MY – Malaysia, NZ – New Zealand, PL – Poland, RU – Russia, SE – Sweden, SG, Singapore, TH – Thailand, TR – Turkey, UA – Ukraine, US – United States, VE – Venezuela, ZA – South Africa

Researchers in R&D (per million population), 2012 or closest year

Figure IV: Association between IP Protection and Researchers in R&D: Average Rates by Economy Group 5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0

4,625

1,356 430

Economies scoring in the bottom third of the Index

Economies scoring in the middle third of the Index

Economies scoring in the top third of the Index

Index, 4th edition

The volume of researchers in R&D, reflecting innovative capability in terms of human capital, exhibits a very strong correlation of 0.8 to the Index scores, suggesting a close, statistically significant link between the two. viii

21

A stepwise increase in the number of researchers in R&D is evident: economies maintaining favorable IP regimes possess, on average, 2.5 times more R&D-focused personnel compared with economies whose IP regimes fall within the middle third of the Index); economies in the middle third of the Index in turn have twice as much R&D capacity in terms of human capital than economies whose IP environments require the most improvement. The high volume of human capital focused on R&D among newcomer markets, such as Singapore, South Korea, and Israel, suggests that placing increasing emphasis on innovation-enabling policies, such as strong IP protection, promotes domestic capacity building and greater innovative activity. Additional drivers for Israel’s particularly high share of researchers in R&D, which has grown steadily since the early 1990s,ix are a high level of secondary and tertiary education, and government incentives for R&D.x Russia’s disproportionate number of researchers in R&D compared with its Index score is due in part to a large public science base and a strong focus on secondary and tertiary education although the overall quality of its higher education and scientific base falls behind international standards.xi Strong patent protection supports robust inventive activity

90 80 70

350

GIPC Index, 4th edition, Patentrelated indicators score, standardized to 100 Triadic patenting rates per million population

300 250

60

200

50 150

40 30

Correlation: 0.75

100

20 50

10 US

UK

France

Sweden

Switzerland

Australia

Germany

Singapore

Italy

South Korea

Nigeria

Brazil

South Africa

Algeria

Thailand

Indonesia

Ecuador

India

0 Argentina

0

Triadic patenting rates per million population

100

Venezuela

Index, 4th edition, Patent-related indicators score, standardized to 100

Figure V: Association between Patent Protection and Triadic Patenting Rates: Top 10 and Bottom 10 Economies

Source: GIPC, OECDStat, World Bank A strong correlation of 0.74 exists between the Index scores and economies’ rate of triadic patenting (i.e. volume of patents registered in the three major patent offices in the world, the USPTO, the European Patent Office (EPO) and the Japan Patent Office (JPO), reflecting patent applications of high value) per million population.xii

22

A substantial link exists between economies’ IP environments and the level of inventive activity and in-depth innovation taking place in the market. Looking at the top and bottom economies of the Index, the top 10 economies average around 170 triadic patent applications per million population, compared to an average rate of only 4 among the bottom 10 economies. Sweden, Switzerland, and South Korea all have relatively high patenting rates. As with other global innovation benchmarks, Sweden and Switzerland are among economies that top the sample. On top of strong IP protection, both economies possess excellent scientific research institutions, strong academic-business collaboration, robust public & private spending on R&D and accessibility to VC funds and a skilled workforce and educated researchers.xiii Over the past 15 years South Korea has evolved into a renowned R&D hub by investing heavily in developing a knowledge-intensive environment, supported by the necessary human capital. The economy has also strengthened its IP environment in line with international standards.xiv Today it serves as a home to some of the world’s leading ICT companies, such as LG and Samsung.

23

A supportive IP environment promotes an advanced technology market Figure VI: Association between IP Protection and Access to the Latest Technologies

Availability of latest technologies, Global Competitiveness Report 2015 (score out of 7, standardized to 100)

100

Correlation: 0.83 AE

90

CH

IL CA

JP NZ

CL

80

MY TW

SE

US GB

SG

DE FR

AU KR

ZA IT

MX 70 TH

TR

ID

BR

EC 60

PE

NG UA VN

IN

PL

CO CN RU

AR DZ

50 VE 40 20

30

40

50

60

70

80

90

100

Index score (standardized to 100), 4th edition

Source: GIPC, World Economic Forum/Executive Opinion Survey Legend: AE – UAE, AR – Argentina, AU – Australia, BR – Brazil, CA – Canada, CH – Switzerland, CL – Chile, CN – China, CO – Colombia, DE – Germany, DZ – Algeria, EC – Ecuador, FR – France, GB – United Kingdom, ID – Indonesia, IL – Israel, IN – India, IT – Italy, JP – Japan, KR – South Korea, MX – Mexico, MY – Malaysia, NG – Nigeria, NZ – New Zealand, PE – Peru, PL – Poland, RU – Russia, SE – Sweden, SG, Singapore, TH – Thailand, TR – Turkey, TW – Taiwan, UA – Ukraine, US – United States, VE – Venezuela, VN – Vietnam, ZA – South Africa Availability of the latest technologies, as captured in the World Economic Forum’s Global Competitiveness Report 2015 and Executive Opinion Survey,xv displays a very strong correlation of 0.82 with the Index scores. Firms and people in economies scoring above the median level of the Index are 30% more likely to benefit from access to the most recent technological developments compared to those in economies whose IP environments trail behind. Canada’s relatively high rate of access to technologies can be explained by its proximity to the U.S. Israel also has comparatively wide availability of new technologies, due in part to widespread access to ICT infrastructure and strong public and private demand for cutting edge technologies.xvi The UAE’s considerable lead in terms of technological readiness on economies scoring similarly in the Index can be linked to dedicated government investment in 24

the ICT sector, including in online services, and a developed e-commerce infrastructure.xvii Conversely, availability of technologies in Poland and Italy is relatively low. Explanatory factors include the lack of an innovation-driven environment and governmental support, as well as low investment in R&D and human capital.xviii Mature IP environments experience enhanced access to creative content

100 90

GIPC IP Index scores, 4th edition, standardized to 100

80 70 60 50 40 30

VOD and streming services penetration, The Connected Consumer Survey 2014-2015

Correlation: 0.64

20

80% 70% 60% 50% 40% 30% 20%

10

10%

0

0%

VOD and streming services penetration, The Connected Consumer Survey 20142015

Index scores, 4th edition, standardized to 100

Figure VII: Association between IP Protection and VOD and TV Streaming Penetration: Top 5 and Bottom 5 Economies

Source: GIPC, Connected Consumer Survey The Index scores present a fairly strong association with rates of video-on-demand and television streaming services penetration, as measured by the Connected Consumer Survey.xix In economies scoring above the median level of the Index, advanced and easy-access delivery of home entertainment tends to be available to at least 30% of the population compared to only 9% in economies whose IP regimes require greater improvement. On average, nearly half of the population in the Index’s top 5 economies benefit from accessibility to exclusive global and national programming via advanced services such as VOD and streaming, as opposed to only 2% of the population in the Index’s bottom 5 economies. Germany’s relatively low level of Video on Demand (VOD) and streaming penetration may be explained by gaps in advanced cable and internet networks compared to the other EU-5 economies and a domestic preference by most Germans for public broadcasting via traditional television networks.xx

25

IP protection boosts private sector spending on R&D Figure VIII: Association between IP Protection and Company Spending on R&D

Company spending on R&D, Response to World Economic Forum Executive Opinion Survey 2015-2016, standardized to 100

Companies 90 spend heavily on R&D 80

CH

Correlation: 0.75

JP IL

DE SE

MY

SG

TW

70 ID

AE CN

IN

Companies do not spend on 30 R&D 20

NZ

AU IT

BR UA VN

VE

CA

ZA

TH

50

40

FR GB

KR

60

US

EC ARNG DZ

30

RU TR PE

40

PL

MX CL CO

50

60

70

80

90

100

Index 4th edition Scores, standardized to 100

Source: GIPC, World Economic Forum/Executive Opinion Survey Legend: AE – UAE, AR – Argentina, AU – Australia, BR – Brazil, CA – Canada, CH – Switzerland, CL – Chile, CN – China, CO – Colombia, DE – Germany, DZ – Algeria, EC – Ecuador, FR – France, GB – United Kingdom, ID – Indonesia, IL – Israel, IN – India, IT – Italy, JP – Japan, KR – South Korea, MX – Mexico, MY – Malaysia, NG – Nigeria, NZ – New Zealand, PE – Peru, PL – Poland, RU – Russia, SE – Sweden, SG, Singapore, TH – Thailand, TR – Turkey, TW – Taiwan, UA – Ukraine, US – United States, VE – Venezuela, VN – Vietnam, ZA – South Africa A very strong correlation of 0.75 exists between the Index score and company-level spending on R&D.xxi When comparing the same correlation with the scores in the third edition of the Index, this link is confirmed; with an increase of nearly 30% in the sample size this correlation has risen from 0.73 to 0.75, strengthening the idea that a statistically significant relationship between IP protection and private sector spending on R&D. An advanced IP environment is more likely to encourage local companies to invest in R&D activities and to a greater extent than economies with weaker IP regimes. Companies in economies scoring in the middle third of the Index are 15% more likely to invest in R&D activities compared to companies in economies scoring in the bottom third. Some Asian emerging markets, including Malaysia, Taiwan, and Indonesia, have witnessed a significant increase in local companies’ spending on R&D in recent years, mainly due to a growing number of educated, highly-skilled researchers, enabling companies’ transition from simple product development and testing to basic research, planning and design activities.xxii

26

The UAE’s relatively high private sector spending on R&D can be partially explained by an overall shift towards a knowledge and innovation-based economy, supported by its national innovation strategy and Vision 2021 plan. Still, without strengthening of its IP regime, it will be difficult for the UAE to move up the innovation ladder.xxiii Strengthening IP rights supports high-value job creation Figure IX: Association between IP Protection and Share of Workforce Employed in Knowledge-Intensive Servicesxxiv Share of workforce employed in knowledgeintensive activities (%), 2014 or nearest year

60

Correlation: 0.80 CH 50 IL CA

RU

NZ

40 UA

AE

AU

SG FR

GB DE SE

KR IT

PL

US

30

20

DZ

VE

BR

PE

ID

JP

CL

TR

EC

TH

10

MY

ZA

AR

MX CO

CN

VN 0 20

30

40

50

60

70

80

90

100

Index score, 4th edition, standardized to 100

Source: GIPC, International Labor Organization ILOSTAT Database Legend: AE – UAE, AR – Argentina, AU – Australia, BR – Brazil, CA – Canada, CH – Switzerland, CL – Chile, CN – China, CO – Colombia, DE – Germany, DZ – Algeria, EC – Ecuador, FR – France, GB – United Kingdom, ID – Indonesia, IL – Israel, IT – Italy, JP – Japan, KR – South Korea, MX – Mexico, MY – Malaysia, NZ – New Zealand, PE – Peru, PL – Poland, RU – Russia, SE – Sweden, SG, Singapore, TH – Thailand, TR – Turkey, UA – Ukraine, US – United States, VE – Venezuela, VN – Vietnam, ZA – South Africa

27

Figure X: Association between IP Protection and Share of Workforce Employed in Knowledge-Intensive Services By Index Scores Share of workforce employed in knowledge-intensive activities (%), 2013/2014 or nearest year, average

60 50

42%

40 30

26%

20

15%

10 0

Economies in bottom third 0.5 1

1.5 Economies in 2 middle third 2.5

Economies in top third 3 3.5

Index, 4th edition

The Index score exhibits a very strong positive link with rates of employment in knowledge-intensive sectors. This link, based on an almost 30% increase in sample size, is even stronger in the fourth edition of the Index compared to the third edition, with a rise in correlation from 0.77 in the third edition to 0.79 in the fourth edition. An incremental increase in knowledge-intensive jobs associated with a similar rise in Index score is visible when looking at economies scoring in the bottom, middle and top thirds of the Index. Japan and the U.S. are relative outliers, with a growing number of knowledgeintensive jobs moving to emerging marketsxxv and rising barriers to higher education in STEM fields including reduced spending and increased tuition expenses.xxvi Russia’s relatively high share of knowledge-intensive employment is partly a result of a steady increase in workers with secondary and tertiary education and their distribution in numerous industrial segments, resulting in an increase in medium-level knowledge-intensive jobs.xxvii

28

IP rights lead to biomedical foreign direct investment Figure XI: Association between IP Protection and FDI: Case Study of the Life Sciences in Terms of Clinical Trial Activity

80

600

Number of clinical trials to date registered in Clinicaltrials.gov per million population (2014)

500

70 60

Correlation: 0.68 400

50 300

40 30

200

20 100 10 0

Source: GIPC, Clinicaltrials.gov Economies’ clinical trial intensity, serving a proxy for life sciences FDI, displays a strong association to biomedical IP rights as measured by the Index’s life sciencesrelated indicators’ score.xxviii A clear distinction exist between economies scoring above and below the median level of the Index in terms of the life-sciences related indicators specifically: on average, economies within the upper half host as much as 13 times more clinical trials compared to economies within the lower half. Some economies are known outliers: Israel, Sweden, and Switzerland’s high clinical trial intensity is at least partially explained by their having established world-leading biomedical sectors and research hubs.xxix For its part, Taiwan has invested considerable efforts in recent years to raise its clinical environment to international standards and to streamline the regulatory process for clinical trial approval.xxx In contrast, Japan tends to have a relatively weak clinical trial intensity mainly due to a lack of culture of clinical research, specific local regulatory hurdles, and high relative costs.xxxi

29

0

Number of clinical trials to date registered in Clinicaltrials.gov per million population (2014)

90

700 GIPC Index scores, 4th edition, life sciencesrelated indicators, standardized to 100

Venezuela Thailand India Indonesia Ecuador Algeria Argentina Vietnam Nigeria Turkey Brazil South Africa China UAE Ukraine Brunei Peru Malaysia Russia Chile Mexico Colombia Taiwan Canada Israel Poland New Zealand South Korea Japan Australia Italy Singapore Switzerland France Germany Sweden UK US

Index scores, 4th edition, life sciences-related indicators, standardized to 100

100

5. Overall Findings 5.1 The Global IP Rights Environment in 2015 Have things improved or worsened for IP rights holders globally in 2015? Covering close to an estimated 85% of world GDP, the Index is a good approximation of the global state of IP protection in the world. But how can we assess whether the environment has improved or deteriorated? To begin with, we can look at the past two editions of the Index. Have economies improved their score compared with last year? What do the individual economy results tell us? Figures XII and XIII show the differences in economy performances for the past two editions of the Index. Figure XII: Index Third Edition versus Fourth Edition, Economy Score, Bottom Half 30 25 20 15 10 5 0

3rd edition

4th edition

Figure XIII: Index Third Edition versus Fourth Edition, Economy Score, Top Half 30 25 20 15 10 5 0

3rd edition

4th edition

30

Comparing the 30 economies included in the past 2 editions of the Index, it is clear that performance is quite mixed. Roughly half of the sampled economies (14) saw their scores increase while the other half saw their score either decrease (15) or stay the same (1 economy). Yet digging a bit deeper into these results and comparing the movement of the top half versus the bottom half of the Index, except for a few notable examples (a number of economies, including China and the UAE, made positive strides overall as well as within categories of the Index, which is discussed later), it seems as if positive movement in the Index has been concentrated in the top half of the Index. What explains this limitation? At one level, this movement has been shaped by the use of a new measure of physical counterfeiting for indicator 20, Global Measure of Physical Counterfeiting. As explained in section 3, this new measure of physical counterfeiting provides a more recent estimate of a given economy’s propensity for counterfeiting than the GTRIC-e measure used in previous editions of the Index. So in that sense, the fact that so many of the mapped Index economies have increased their score may not be an ideal indicator of the state of the global IP environment in 2015 as it is simply a change in the methodology used for one of the indicators. There are also examples of how the IP environment has become more challenging in a number of strategic economies. For instance, one key trend is that a growing number of economies have intensified their efforts to localize the production and development of innovative technologies. The use of policies that make market access contingent on the sharing of IP and technology with a local actor (whether public or private) has increased. Economy examples include Brazil, Russia, China, and Indonesia—all of which make use of or have intensified these efforts in 2015. Even in the new economies added to the Index this year, these policies are prevalent. Of the 8 new economies evaluated, Ecuador stands out as an example of an economy attempting to develop its innovative and technological capacity through the issuing of compulsory licenses (CLs) for biopharmaceutical products—a policy made explicit by Ecuador’s Intellectual Property Institute. The IP environment remains challenging in other areas as well. As is discussed below in the category-by-category subsections, the availability and enforcement of copyrights (especially in the online space) remains highly challenging. Over 60% of the 38 sampled economies fail to achieve half of the available score for this category. And while the challenges are particularly pronounced in emerging and middle-income economies, this is not the case of national income or stage of development being the key determining factor. For example, Switzerland, Sweden, Israel, Italy, Poland, UAE, Brunei and other high-income and developed economies face real challenges in protecting and effectively enforcing copyright, with some emerging economies actually achieving a higher score in this category. Similarly, calculating the overall total score of all sampled economies vis-à-vis the maximum available total score also suggests a slight weakening of the environment in 2015. In the previous edition of the Index, the combined score of all the 30 economies sampled was 54.27% of the total available score. This year that number was 53.62% for the entire sample. And while a drop of just over 0.5% may not seem significant, as described in the preceding section on the economic impact of the strength or 31

weakness of a given economy’s national IP environment, even a small weakening of the global environment can result in measurable lost economic activity. So in this sense, every basis point counts. The same is true when economies introduce modifications to strengthen their IP system. Small, incremental changes to an economy’s IP laws can strengthen the IP ecosystem and, in turn, enable economies to harness the economic benefits that more robust IP systems provide. Taking a slightly longer-term perspective, we can also compare the total results of the 4th edition of the Index with all previous editions. Indeed, looking at the results of the Index over time, the combined score of the 38 economies sampled as a percentage of the maximum available score is the 2nd lowest on record. Figure XIV shows the composite score of the economies sampled as a percentage of the maximum score for each of the 4 editions of the Index. Figure XIV: Overall Total Score, Percent Available Score Index, First through Fourth Editions, 2012–16 59.00% 57.00% 55.72% 55.00% 54.27%

53.71%

53.00% 51.05%

51.00% 49.00% 47.00% 45.00% 1ST EDITION

2ND EDITION

3RD EDITION

4TH EDITION

Yet, useful as it is to get an overall “feel” for the global IP rights environment, looking at only this overall score risks overlooking some important contributing factors. To begin with, it is worth noting the obvious fact that these comparison points are still fairly limited. This is only the fourth edition of the Index, so making definitive judgments of trends over time—especially for the composite and overall score—is difficult with only four points of comparison. Second, the composition of the Index has changed over the years—most importantly, by the number of economies examined. The 1st edition of the Index was published in 2012; it mapped and compared the national IP environments in only 11 economies. Today, the Index covers 38 economies—a sizable increase. Depending on the strength of the national IP environment of those economies added, the overall results of a given edition of the Index can move up or down. If a large number of economies with 32

relatively strong IP environments are added, then the overall composite score will move up regardless of what has changed in the underlying global environment. The same logic applies if most economies added in a given year have relatively weaker environments. On the bright side, the accuracy of conclusions drawn in the aggregate will continue to improve year on year as the Index matures and both aggregate and economy-specific trends can be more definitively discerned. Meanwhile, it remains possible to instead zoom in on a select number of economies and assess their performance over time. The Original 11—Tracking Change over Time Of the 38 economies mapped in the 4th edition of the Index, 11 have been included in every previous edition. Together as a data sample, they provide the best opportunity to see both aggregate and individual changes over time. How has the national IP environment changed in these economies over the past 4 editions? Which economies have strengthened their national IP environments and which ones still face challenges? And is it possible, based on these individual economy changes, to draw some conclusions about global trends? Figures XV, XVI, and XVII show the movement in overall score over the 4 editions of the Index for the original 11 economies. The economies have been grouped according to relative strength of IP environment from top to bottom. Figure XV: Overall Total Score, Percent Available Score Index, Top 3 Economies from Original 11 US

UK

Australia

100.00%

95.00%

90.00%

85.00%

80.00%

75.00%

70.00% 1ST EDITION

2ND EDITION

3RD EDITION

4TH EDITION

33

Figure XVI: Overall Total Score, Percent Available Score Index, Middle 4 Economies from Original 11 Canada

Mexico

Chile

Malaysia

65.00%

60.00%

55.00%

50.00%

45.00%

40.00% 1ST EDITION

2ND EDITION

3RD EDITION

4TH EDITION

Figure XVII: Overall Total Score, Percent Available Score Index, Bottom 4 Economies from Original 11 Russia

Brazil

China

India

50.00%

45.00%

40.00%

35.00%

30.00%

25.00%

20.00% 1ST EDITION

2ND EDITION

3RD EDITION

4TH EDITION

34

A few points stand out from these figures. To begin with, they show how a slight majority of economies (6) have seen their overall scores decrease. In that sense, the movement of these economies over time also mirrors the overall movement of the economy’s composite score described above. Yet, in a sense, this result is slightly misleading because, at the same time, a number of economies have seen considerable improvement as measured by an improved score on the Index. Indeed, perhaps what stands out most clearly from the results over time for these 11 economies is the diversity of performance regardless of level of economic development or region. There is no clear universal pattern of performance over the course of the 4 editions of the Index. Some economies have improved their national IP environments. In others, the environment has weakened. And in others, the score has remained essentially the same over time. China, for example, while still facing significant challenges in protecting intellectual property, has steadily climbed and improved its score year by year since the 1st edition of the Index. Improvements in enforcement and the legal environment helped to strengthen its national IP environment. If China could do it, perhaps the other BRIC economies would show a similar trend? But this is not the case. In contrast to China, Brazil’s score has decreased slightly over the course of the 4 editions, with rights holders continuing to face serious challenges in the availability and enforcement of fundamental IP laws and measures. Similarly, India, while taking some positive steps over the years, remains at the bottom of the Index rankings despite the Index having tripled the number of economies sampled since its inception. Likewise, Russia’s score has also gone down over the course of the 4 editions. Continued difficulties in enforcing IP rights and a sustained drive toward localizing manufacturing and production, including requirements to share local technologies and content, have hampered otherwise positive steps with regard to the introduction of regulatory data protection (RDP) for submitted clinical research data as well as new robust measures to deal with online copyright infringement. Looking at some other middle-income economies, it is clear that while many economies have seen their scores drop, what actually stands out is the significant improvements others have made. For example, Malaysia’s score has gone up quite considerably and steadily over the course of the four editions, with positive reforms to its copyright law standing out. Conversely, other middle-income economies have seen their national IP environment weaken or stand still. Chile and Mexico, for instance, have both seen their scores decrease over the four editions. What is also clear are the large differences between the three groupings in terms of their relative position within the Index. Regardless of their respective movement over the 4 editions, the top 3 economies remain apart relative to the bottom 4 economies. Between 60 and 70 percentage points separate the top performers from the economies at the bottom—a difference that has not narrowed appreciably over the Index’s 4 editions. Even Canada—which has improved its overall score in each edition of the Index—remains an outlier among high-income OECD economies. Despite increasing in each edition of the Index, Canada’s score is still the lowest of all OECD economies and its national IP environment has consistently remained closer to middle-income economies such as Malaysia and Mexico than the top Index performers such as the United States and United Kingdom. 35

Perhaps this is the most important insight from the Index: each individual economy and its national IP environment needs to be understood both on its own, in relation to specific IP sectors and categories within the Index, and in relation to other economies. Indeed, in this sense, the continued growth and maturity of the Index and addition of new economies provides an even stronger and richer source of data. Learning from the Index—More data = Greater insight about IP environments As noted in section 3, the growth in the number of economies included in the Index has many important ramifications for both the Index and the statistical and economic analysis performed in the accompanying Annex. To begin with, the rising number of economies paints an increasingly more detailed picture of the state of IP protection and availability of IP laws and measures. The greater sample size means that it is now possible to make more “like-for-like” comparisons between economies because there are many more potential points of comparison. For instance, economies can now be grouped together not only as individual entities but also in closer clusters or groups, whether it be according to income, region, or other indicator of socioeconomic development. This marks an important evolution of the Index, as this greater evidence base means more definitive judgments can be made about the effectiveness and enforcement of IP laws across the world. For example, the majority of economies included in the fourth edition of the Index are now classified as high-income economies by the World Bank. The strength of a national IP environment is often associated with the national and per capita wealth of a given economy. The richer and higher income a given economy has—the supposition is—the more likely it is to have a stronger and more sophisticated national IP environment. Yet as the results of the fourth edition of the Index show, national wealth and per capita income is only one factor affecting the availability and enforcement of IP laws. Instead, there is great variety between high-income economies as to both the overall strength of their national IP environment and their sector-specific strengths. Economies such as Russia, UAE, and Brunei have significantly weaker national IP environments than economies with lower per capita income such as Poland, Colombia, Malaysia, and Mexico. This important empirical insight suggests that focusing on income levels as a driving determinant of the level of sophistication and development of a national IP environment is far from the whole picture. Indeed, coupled with the insights from section 4 and the strong, correlated links between the strength of a national IP environment and various kinds of economic activity, it is clear that strengthening a given economy’s national IP environment—regardless of level of income—is more likely than not to have a positive economic impact.

36

5.2 The Fourth Edition of the Index: Overall Economy Scores The Index consists of 30 indicators divided into six categories. Each indicator is scored between 0 and 1. The maximum available score for the entire Index is 30. Figures XVIII and XIX give the overall total scores for the top half and bottom half of all the 38 economies benchmarked and ranks them in order of their total scores, from lowest to highest. Figure XVIII: Overall Economy Scores, Top Half 30

27.12 27.22 27.36 27.53 24.79 24.9

25

22.69

28.61

25.63

23.32 23.34

21.38 20.06 18.17 18.75

20

15

13.77 13.83

14.78 14.79

10

5

0

Figure XIX: Overall Economy Scores, Bottom Half 30

25

20

15

10 6.42

7.3

7.4 7.83

9.42 8.54 8.59 8.62 8.91

10.41

11.44 11.55 11.74 11.87

12.89 12.3 12.43

13.05 13.06

5

0

37

The overall results of the fourth edition of the Index show how economies are forming distinct clusters or groups of performers within 1.5-2 points of each other. For example, although the United States is still the top-ranked environment the difference between its overall score and other economies’ scores is not that large. Indeed, a cluster of five economies is now forming at the top separated by less than 1.5 points. The United States, United Kingdom, Germany, France and Sweden together form a group of top performers with all economies having advanced, sophisticated national IP environments. Although, here too, there is great variation within the different categories of the Index. Sweden, for example, faces some significant challenges with regards to copyright piracy online. Likewise, even in the U.S. questions have come to the fore over the past few years with regards to the patentability of biotechnology related innovations and the general enforcement environment. So in this sense, no economy can rest on its laurels. And, as discussed below, while the UK maintains its position as a top performer in the enforcement category of the Index, the introduction of plain packaging for certain products has restricted the use of brands, trademarks, and trade dress, limiting the ability of trademark owners to exploit their rights. Below these top-performers is a trio of Singapore, Switzerland, and Australia all within 1 point of each other. And while these economies by and large have welldeveloped and strong national IP environments – Singapore and Switzerland are world leaders in Category 1: Patents, Related Rights, and Limitations – here too there remain challenges. Online piracy remains a real challenge in Switzerland. The Swiss Government is in the process of proposing changes to copyright laws but at the time of research no new copyright amendments had been proposed or passed into law. Similarly in Australia there are a number of IP related issues. This year, the Australian High Court reversed the 2014 ruling of the Federal Court that had upheld the patentability of isolated genetic material in D’Arcy v. Myriad Genetics. This decision weakens the patentability of biotechnology and diagnostic-related inventions in a manner similar to the U.S., where a decision by the U.S. Supreme Court in 2013 also invalidated Myriad’s claims on isolated genes. Japan, South Korea, Italy, and New Zealand round up the next group of economies all separated by less than 2 points. Japan is somewhat of an outlier in this group as within most of the categories of the Index its scores are much closer to the top performers. Japan’s low score in Category 6: Membership and Ratification of International Treaties decreases its total score. Italy is a new addition to the Index. And while by and large Italy maintains a strong national IP environment, it faces a number of challenges particularly with regards to levels of copyright piracy. Israel, Poland, and Canada constitute the final group of high income OECD economies. As in past editions, Canada remains the OECD economy with the weakest national IP environment and lowest overall score. This despite the Index more than tripling in the number of economies sampled over the four editions. Israel and Poland are both new economies. Both have benefited from relatively recent reform efforts – Israel with its patent environment in the past two years and Poland more gradually over the past decade as a result of its accession to and membership in the EU. Still, 38

both economies face challenges, particularly with regards to the protection of copyright. In Israel, significant parts of a modern copyright legal framework remain to be introduced, and in Poland the issue is enforcement against piracy. Taiwan, Malaysia, Mexico, and Colombia form the next group of economies separated by less than 1 point. Together these, with the exception of Taiwan, middle income economies show the real benefits of what can be achieved when reforming the national IP environment as well as illustrating the challenges that remain. Malaysia, for example, is an economy that since 2012 has fundamentally reformed its copyright environment culminating its accession to the WIPO Internet Treaties in 2014. However, in other categories Malaysia faces real challenges. In Category 1: Patents and Related Rights Malaysia’s score has remained at the bottom since the first edition of the Index. In particular challenges remain in respect of IP laws and measures relating to the life sciences. Malaysia’s accession to and eventual implementation of the TPP agreement should significantly boost its score. Taiwan still faces significant challenges in the enforcement space particularly as it relates to copyright. Long term positive reform efforts in Mexico have stalled somewhat in 2015 with new localization requirements introduced. And while positive action was taken in 2015 in Colombia with the introduction of new statutory damages for trademark infringement, commitments made under the WIPO Internet Treaties and U.S. FTA remain unfulfilled. Russia, Chile, China, the UAE, and Peru constitute the next group of economies separated by less than 1 point. This group is a diverse set of economies ranging from wealthy UAE with an estimated 2014 per capita GDP over USD 44,000 to Peru with a per capita GDP estimate of USD 6,550.15 As noted above, since the inaugural edition of the Index, China has steadily improved its national IP environment. And while there are still substantial challenges to rights-holders in China – not least in the space of physical counterfeiting where customs seizure statistics and modelling in the Global Physical Counterfeiting Measure suggests China is the point of departure for the vast majority of physical counterfeit goods in the world – of the BRIC economies, it is clear that China’s IP environment has improved the most over the last half decade. In contrast Russia’s national IP environment is characterized by more of a mixed record. Positive reforms have taken place in many areas ranging from protection of trade secrets and damages for patent infringement to the protection of copyright online where new legislative amendments were introduced in 2015. Yet Russia has also intensified mandatory localization efforts in a policy framework designed to improve domestic technological capacity and innovation in high tech sectors including biopharmaceuticals. Over the past year, the UAE has strengthened its IP environment considerably, particularly as it relates to Category 5: Enforcement, but overall compared to other developed high income economies the UAE continues to lag behind. Peru’s score has gone down this year as a result primarily of efforts to narrow patentability criteria which have resulted in a score reduction in Category 1: Patents, Related Rights, and Limitations.

15

World Bank GDP per capita (current US$): http://data.worldbank.org/indicator/NY.GDP.PCAP.CD

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Four economies – Turkey, South Africa, Ukraine, and new addition Brunei – are separated by less than 0.5 points. Like the UAE, for a high income economy, Brunei’s IP environment remains relatively underdeveloped. Important reforms have taken place over the past half-decade – including the introduction of a new patent law, establishment of a dedicated IP office, and strengthening of copyright sanctions – but major challenges persist particularly with regards to enforcement and piracy levels. Like other negotiating parties to the TPP, Brunei’s accession to and full implementation of the agreement would strengthen its national IP environment and raise its Index score quite significantly. As has been described in past editions of the Index, Turkey, South Africa, and Ukraine continue to face major challenges in their respective national IP environments. The Ukraine remains a central hub for counterfeit goods and while some reform efforts have been put forward in 2015 the political and regional instability is likely to delay any further concrete legislative action. In Turkey and South Africa, localization efforts – current and suggested – continue to bring down the overall scores. Both economies also suffer from relatively high levels of piracy. Brazil, Nigeria, Argentina, Indonesia, and new additions Ecuador and Algeria constitute the penultimate group of economies. Together they are separated by less than 2 points with scores ranging from 10.41 for Brazil to 8.54 for Algeria. As noted above, Brazil’s national IP environment has since the inception of the Index been characterized by its relative level of stagnation and even regression in important aspects. Fundamentally the Brazilian national IP environment has not changed substantially over the four editions of the Index. The most notable developments of 2015 are more likely to have entrenched many negative aspects. Several potential precedent-setting judgments were made regrading, first, ANVISA’s role in reviewing and, in effect, approving or disapproving patent applications for biopharmaceutical products. Second, there was a Court of Appeals decision upholding the INPI invalidation in the ongoing “mailbox” court cases relating to pharmaceutical product patents filed in the mid-1990s. All in all, Brazil’s national IP environment remains closer to the state of lower-middle income economies such as Nigeria and Indonesia than more dynamic emerging economies like China and Malaysia. Nigeria’s overall score fell slightly in 2015. The presence of counterfeit goods remains a significant problem with challenges remaining with respect to both the legal framework and active enforcement. The IP environment in Argentina remains challenging. No significant positive changes to the IP legal environment or relevant regulations took place in 2015. Algeria and Ecuador are both new additions to the Index and both economies face many challenges. The environment for IP rights-holders in Algeria is difficult. Algeria lacks many fundamental IP laws (particularly with regards to Category 1: Patents, Related Rights, and Limitations) and the enforcement and application of existing legal rights is patchy. Ecuador has in recent years been moving in the opposite direction than most emerging economies and significantly weakened its national IP environment. The Government is an active user of compulsory licenses of biopharmaceutical products and has also stated that this is a public policy tool to be used for technological development. In other areas, Ecuador’s legal and IP framework remain far outside international norms. 2013 amendments to the Intellectual Property Law removed criminal penalties and sanctions for IP rights infringement. Finally, while overall the environment for IP rights-holders remains difficult (particularly in the life sciences with many fundamental IP rights not offered) in some areas, 40

Indonesia has made substantial reform efforts. For instance, Indonesia has reformed its copyright laws and 2015 saw the active application and implementation of a ministerial notification system on online infringement. At the bottom of the Index, the group of Venezuela, India, Thailand, and Vietnam are separated by less than 1.5 points and together form a distinct group. These economies all have significant weaknesses in the availability and enforcement of IP rights. Venezuela, a new addition to the Index, has the lowest score of all economies with serious legal and enforcement deficiencies in all categories of the Index. Although 2015 saw the potential for some concrete improvements with regards to, for example, more clarity on the patentability of CIIs at the time of research these policies had been suspended and India remains at the bottom of the Index for the fourth year in a row. Rights-holders in Thailand and Vietnam also face fundamental challenges in the availability and enforcement of IP laws. Vietnam’s environment is expected to improve significantly as a result of its accession to and full implementation of the TPP agreement.

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5.3 Category 1: Patents, Related Rights, and Limitations Figure XX summarizes the total scores for Category 1. This category measures the strength of an economy’s environment for Patents, Related Rights, and Limitations. The category consists of seven indicators with a maximum possible score of 7. Figure XX: Scores, Category 1: Patents, Related Rights, and Limitations 7 6.25 6.3 5.8 5.85

6

6.5 6.5 6.5 6.5 6.5 6.5 6.5

6

5.25 5

5

4.75 4.1

4 3

3

3.1

3.25 3.35

4.3

3.5 3.5 3.6

2.75 2.5 2.5 2

2

1.75 1.5 1.5 1.5 1.25 1.25 1.25 1

1

1

0.75

Venezuela Algeria South Africa Argentina Brazil India Ecuador Indonesia Thailand Vietnam Nigeria Peru Ukraine Malaysia Mexico Russia Colombia Chile Brunei UAE Turkey China Canada New Zealand Poland Taiwan Israel South Korea Australia Italy Japan France Germany Singapore Sweden Switzerland UK US

0

The overall results from Category 1: Patents, Related Rights, and Limitations show a clear group of high-performing economies all with a score of over 5 or 70% of the maximum available score for this category. In all, 13 of the 38 sampled economies achieve a score of 5 or above in this category. While this group is dominated by highincome OECD economies, more broadly there are a number of middle-income economies that do relatively well in this category. For example, China continues to be the highest ranked middle-income economy in this category and the highest ranked of the BRICS. Indeed, looking at the BRICS what stands out is the relative and absolute poor performance of Brazil, India, and South Africa which are all at the bottom of this category. Of note is that, unlike all other sampled economies in the Index, newcomer Venezuela fails to achieve a full score in indicator 1 as it does not offer a full 20 year term of protection for patents. As in past editions of the Index, Canada’s score in this category is the lowest of all developed high income OECD economies and is closer to that of China, Turkey, the UAE, and Brunei than that of Singapore, the UK, US, Japan, and other high-performers.

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5.4 Category 2: Copyrights, Related Rights, and Limitations Figure XXI summarizes the total scores for Category 2. This category measures the strength of the environment for Copyrights, Related Rights, and Limitations. The category consists of six indicators with a maximum possible score of 6. Figure XXI: Scores, Category 2: Copyrights, Related Rights, and Limitations 6

6

5.63

4.91 4.99

5

4.6

5.13

5.24

5.38

4.74

4.28

4

3.78 3.38 3.38 3.41 3.13

3 2.28

2

1.58 1.63 1.63 1.47 1.48 1.49 1.52 1.53 1.03

1.88 1.78 1.84

2.38

2.53

1.99 1.99 1.99 2.02 2.03 2.03 2.04

1.13

1

Vietnam Argentina India Ecuador Nigeria Algeria Brunei Ukraine Chile Venezuela Thailand Colombia Brazil Peru Russia Turkey Indonesia Taiwan UAE Mexico China Poland South Africa Switzerland Canada Israel Italy Malaysia Japan Sweden South Korea New Zealand France Australia Singapore Germany UK US

0

The results for Category 2 show how challenging the environment is for creators and copyright holders in the vast majority of sampled economies. Over 60% of the economies in the Index fail to achieve a score of half or more of the maximum available score in this category. And almost 50% of the sampled economies fail or only just reach a score of 2 out of 6 or one-third of the maximum available score. Most economies in the Index fail to have in place effective and modern legal mechanisms to combat online piracy and infringement of copyright. Of note is that these difficulties are not concentrated in middle income and emerging economies. Rather, many high income and OECD economies struggle with protecting copyright and offering rights-holders modern and effective remedies. This includes for example, new additions Brunei, Italy, Israel, and Sweden as well as the UAE and Switzerland.

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5.5 Category 3: Trademarks, Related Rights, and Limitations Figure XXII summarizes the total score for Category 3, which consists of five trademark indicators with a maximum possible score of 5. Figure XXII: Scores, Category 3: Trademarks, Related Rights, and Limitations 5

4.75 4.75 4.5 4.5 4.5 4.5 4.5 4.5

4.5 4

4

4

3.75 3.75 3.5 3.5

3.5

3.25 3.25 3.25 3.25 3.25 3.25 3.25 3.25 3.25 3.25 3.25 3

3

3

3

2.75 2.75 2.75 2.75 2.75 2.5 2.5 2.5 2.5

2.5 2 1.5

1.5 1 0.5 Turkey Algeria Russia Ukraine Venezuela Ecuador India Indonesia Nigeria Thailand Brunei Mexico Peru Argentina Australia Brazil Chile China Colombia Malaysia Poland South Africa UAE Vietnam Israel Taiwan Canada UK Italy Singapore France Germany Japan New Zealand Sweden Switzerland South Korea US

0

To a greater extent than in other categories, most economies sampled in the Index offer basic forms of trademark protection. Generally challenges persist in the enforcement of trademark rights both with regards to traditional forms of infringement as well as violations occurring through online merchants and auction sites. A growing number of economies have introduced or are in the process of imposing “plain” packaging requirements for the intended purpose of promoting public health. Of note, Australia introduced standardized packaging for tobacco products in 2012 and the UK followed suit in 2015 with the relevant regulations scheduled to take effect at the beginning of 2016. Other economies such as France and New Zealand are currently at various stages of passing or implementing such requirements for these and potentially other types of goods. A policy of plain or standardized packaging severely restricts or even eliminates the use of trademarks and the corresponding trade dress on affected products and limits the ability of trademark owners to utilize their brands, trademarks, and trade dress. As a general matter, such policies, however well intended, have the direct impact of eroding the multi-faceted benefits of trademark laws, including corporate accountability and consumer confidence. If broadly applied, plain packaging would be highly detrimental both to intellectual property systems and to well-functioning markets.

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5.6 Category 4: Trade Secrets and Market Access Figure XXIII summarizes the total scores for Category 4. This category measures the strength of the environment for trade secrets and market access. The category consists of two indicators with a maximum possible score of 2. Figure XXIII: Scores, Category 4: Trade Secrets and Market Access 2

2

2

2

2

2

2

2

2

2

2

1.75 1.75 1.75

1.8 1.6

1.5 1.5 1.5

1.4

1.25 1.25 1.25 1.25

1.2 1

1

1 0.75 0.75

0.8 0.6 0.4

0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5

0.25 0.25 0.25 0.25 0.25 0.25

0.2 China Ecuador Indonesia Thailand Ukraine Venezuela Algeria Argentina Chile India Russia Turkey UAE Vietnam Colombia Nigeria Mexico Peru Brazil Brunei Poland South Korea Malaysia South Africa Taiwan Australia France Italy Canada Germany Israel Japan New Zealand Singapore Sweden Switzerland UK US

0

Many more economies are directly or indirectly introducing policies that make access to their respective markets contingent on the sharing of IP and/or proprietary technologies with local entities. Since indicator 20 was introduced in the second edition of the Index, the number of policies has intensified. Economy examples include Brazil, Russia, China, and Indonesia which all make use and/or have intensified these efforts in 2015. For example, China has since the mid-2000s introduced and implemented a range of policies making access to the Chinese market conditional on the sharing of technology and IP with domestic entities. These policies include the transfer of proprietary technologies in procurement, joint ventures, and standardization processes; local manufacturing limits and requirements; and restrictions on investment by foreign entities, without guarantee they will be protected from unauthorized disclosure, duplication, distribution, and use. 2015 saw the active application of new rules including, for instance, a case in which Qualcomm was forced to pay $975 million for AML violations and to license essential patents at a discounted rate. A number of other companies were also under investigation at the time of research. In addition, proposed guidance from Chinese tax authorities would require a higher amount of global value chain profits from multinational companies to be conducted and “booked” in China as well as greater tax presence overall (such as opening of local subsidiaries) in order to market their products in China. The new rules would reportedly involve transfer and “enhancement” of IP among other assets. Russia has also intensified mandatory localization efforts in a policy framework designed to improve domestic technological capacity and innovation in high tech sectors including biopharmaceuticals.

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5.7 Category 5: Enforcement Figure XXIV summarizes the total scores for Category 5. This category measures the prevalence of IP rights infringement; the criminal and civil legal procedures available to rights holders; and the authority of customs officials to carry out border controls and inspections. The category consists of six indicators, with a maximum possible score of 6. Figure XXIV: Scores, Category 5: Enforcement 6 5.26

5

4.77 4.66 4.73 4.22

4

5.36

5.48 5.48 5.52

5.65

4.89

4.38

3.78 3.37 3.24 3.29 2.96

3

2.68 2.5 2.51 2.15 2.16

2.28 2.32

1.97

2 1.51 1.52

1.64

1.78 1.78 1.81

1.3 1.33

1

0.72 0.79

0.93

1.07 1.12

Ukraine Venezuela Nigeria Indonesia Thailand Vietnam India China Algeria Ecuador Argentina Turkey Peru Russia UAE Brunei Brazil Chile Malaysia Taiwan Colombia South Africa Canada Mexico Poland Italy New Zealand Israel Australia South Korea Switzerland Singapore Japan US France Germany Sweden UK

0

As with Category 2: Copryights, Related Rights and Limitations, a majority of the sampled economies struggled in this category. Almost 60% of the 38 economies included in the Index failed to achieve a score of, or over, half of the maximum available score. All economy scores in this category were affected by the new proprietary Global Measure of Physical Counterfeiting. The Measure has been developed by the U.S. Chamber of Commerce and Pugatch Consilium to provide a new global measure of physical trade related counterfeiting. It provides a total and per economy estimate for each of the 38 economies included in the Index of rates of physical trade related counterfeiting. The results of the Global Measure of Physical Counterfeiting is used as the basis for a given economy’s numerical score for indicator 21 and replaces the OECD GTRIC-e as the source for this indicator. As in past editions, the EU Member States perform well in this category, with the U.S. and Japan trailing behind. Worth noting is that although Canada again placed outside the top tier of economies, Canada’s enforcement score actually increased as a result of the confirmation by the Canadian Government that the newly introduced Combating Counterfeit Products Act actually confers ex officio powers to customs officials.

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5.8 Category 6: Membership and Ratification of International Treaties Figure XXV summarizes the total scores for Category 6. This category measures whether an economy is i) a signatory of and ii) has ratified/acceded to international treaties on the protection of IP. The category consists of four indicators with a maximum possible score of 4. Figure XXV: Scores, Category 6: Membership and Ratification of International Treaties 4

4

4

4

4

4

4

4

3.5 3.5 3.5

3.5 3

3

3 2.5 2

2

2

2

2

2 1.5 1.5 1.5 1.5 1.5

1.5 1

1

1

1

1

1

1

1

1 0.5 0.5 0.5

0.5 0

0

0

0

0

Brunei India Taiwan Thailand Vietnam Brazil South Africa Venezuela Argentina Ecuador Indonesia Israel Japan Malaysia New Zealand UAE Algeria Canada China Mexico Nigeria Chile Colombia Peru South Korea Turkey Russia Singapore Germany Poland Italy Australia France Sweden Switzerland Ukraine UK US

0

Being a contracting party to key international treaties is a reflection of a given economy’s broader participation in the international IP community and embrace of the highest IP standards. Remarkably, less than half of the 38 economies achieve a score of 50% or more of the total available score for this category. Five economies actually score a 0 as they are not contracting parties to any of the treaties included in this category. Just as for categories 2 and 5 the lack of participation and membership in international treaties is not limited to emerging or middle income economies. Quite a few high income and OECD economies score poorly in this category. For example, Brunei, Japan, Israel, New Zealand, and the UAE achieve a score of 1 or less. As has been discussed in previous sections, the accession to and implementation of the TPP agreement is a major development for the international IP environment. The TPP will strengthen the national IP environment in virtually all contacting parties and positively impact all contracting parties’ Index score. Furthermore, a number of other economies sampled in the Index (including Thailand and Indonesia) have stated their intentions of eventually joining the TPP. The future accession of these economies to the TPP and subsequent strengthening of their national IP environment would have a positive impact and, in turn, raise their Index scores.

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5.9 Additional layers of analysis – Comparing economy performance on a regional and sector basis The increase in the number of economies from 11 in 2012 to 38 this year opens up a wealth of opportunities to compare economies that are geographically close to one another in the same region, at the same level of economic development or, in many cases, a combination of the two. As outlined in section 3 the Index has sampled economies from the world’s major regions with particularly strong representation from Latin America, Asia and Europe and Central Asia. Comparing regional scores it is possible to see which regions of the world offer the strongest levels of IP protection. Below figure XXVI shows the regional mean and median score for the 5 regions covered by the Index using the World Bank’s regional divisions. Figure XXVI: Regional Mean and Median Score, Index 4th Edition 30

Median, [VALUE]

25

20

Median, [VALUE] 15 Median, [VALUE]

Median, [VALUE] 21.26

23.39 10

15.65 10.91

12.44 5

0 Latin America

Africa and ME

Asia

Europe and Central Asia

North America

As figure XXX illustrates (and which is largely to be expected) North America and Europe and Central Asia have on average the strongest national IP environments of the five regions mapped. More interestingly is the, firstly, rather big differences between the other three regions and, secondly, the differences between the mean and median scores.

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On the first point it is clear that of the regions covered in the Index, both measured as a median and mean, Latin America is home to the weakest national IP environments. Yet the large discrepancy between the mean and median score also suggests a wide range of scores in the region. Indeed, of the eight Latin American economies mapped in the Index, scores range from a regional high of 13.83 in Mexico to a regional (and Index) low of 6.42 in Venezuela. Similarly, in Asia and Europe and Central Asia there are wide discrepancies between the top and bottom performers. These range from a regional high of 25.63 (Singapore) for the former and 27.53 (UK) for the latter to a low of 7.05 (India) and 11.55 (Ukraine) respectively. Apart from the broad differences between and within these regions, it is striking how, as noted above, income level has relatively little bearing on the strength of national IP environment. For example, Colombia has an estimated 2014 GDP per capita of USD 7,900 compared to Argentina and Brazil which have estimated GDP per capita of USD 12,568 and USD 11,384 per the World Bank. Yet, both Argentina and Brazil are behind Colombia on the Index with the latter having a 30-40% higher score. This has economic costs. As the preceding section 4 and the accompanying Statistical Annex illustrates, examining various indicators of economic activity, Colombia tends to have higher outputs than both Brazil and Argentina. Looking for example at innovation outputs (Correlation number 2 in the Statistical Annex) as measured in the 2015 Global Innovation Index, Colombia is ranked as approximately having the same level of output of innovation as measured by the creation of technologies, media, and knowledge-based services and diffusion and use across the economy. This despite the fact that measured on a per capita income basis Colombia has close to 50% less economic output. Similarly, looking at access to capital (Correlation number 1 in the Statistical Annex) and specifically the attractiveness of a given economy to venture capital and private equity, here too Colombia is ranked higher than its neighbors despite the large discrepancy in per capita income. Understanding sectoral strengths and weaknesses A recurring theme in this and past editions of the Index is the construction of the Index and how the high number of sector-specific indicators included allows users to isolate indicators and, in effect, build sub-indices measuring and comparing economy performance in specific industries and sectors. The performance of a given economy in any given category of the Index or sector measured can differ quite significantly from the overall Index score. For example, a given economy can have a relatively low overall score but be a strong performer measured on a category or sector basis. Below figures XXVII and XXVIII show the score for the 38 economies included in the Index with indicators for the life sciences and creative content isolated; two of the major innovation-driven growth sectors of the future that most economies are seeking to nurture and develop. Both sectors represent high tech industries with accompanying knowledge-intensive jobs. The underlying industries of these sectors are also of societal importance with a strong domestic capacity in, for example, the biopharmaceutical or medical device industry improving access to new technologies and products.

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Figure XXVII: Life Sciences Indicators, % of possible available score, Index 4th Edition16 94 94 93

US Sweden France Germany UK Switzerland Singapore Italy Australia Japan South Korea New Zealand Poland Israel Canada Taiwan Colombia Mexico Chile Russia Malaysia Peru Brunei Ukraine UAE China South Africa Brazil Turkey Nigeria Vietnam Argentina Algeria Ecuador Indonesia India Thailand Venezuela

92 91 91 84 80 80 77 76 70 70 69 57 53 50 49 48 45 44 43 42 42 42 40 38 37 36 34 31 30 28 28 26 25 24 19

0

10

20

30

40

50

60

70

80

90

100

Figure XXVIII: Creative content indicators, % of possible available score, Index 4th Edition17 100%

95% 95%

90%

82%

80%

84%

87% 87%

89%

92%

75% 71%

70%

65% 66% 59%

60%

52%

50%

41% 43% 43%

40% 30%

26%

29% 30% 28% 29% 29%

31%

32%

34% 34% 35%

54% 55%

45% 47%

37%

20% 21% 21% 21%

20%

17%

0%

Vietnam India Thailand Nigeria Venezuela Brunei Argentina Algeria Indonesia Ecuador Brazil Ukraine Taiwan Turkey China Russia UAE Peru Chile South Africa Mexico Colombia Malaysia Canada Poland Israel New Zealand Italy Switzerland Japan South Korea Australia Sweden Singapore France Germany UK US

10%

16

The Index contains 12 indicators that are directly relevant to the life sciences sector. These are indicators 1-2, 4-7, 14-21, 23-26, 28-30. 17 The Index contains 14 indicators that are directly relevant to the creative content sector. These are indicators 8-13, 21-27, 30.

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As one would expect the economies that have the strongest life sciences IP environment are, generally speaking, high income OECD economies. The U.S., Sweden, UK, France, Germany, Switzerland, and Singapore are also home to some of the most dynamic and innovative life science industries in the world. As correlation number 11 shows in the Statistical Annex, the stronger the life sciences IP the more likely a given economy is to see high levels of clinical research and trials. In this sense, isolating the Index indicators for the life sciences provides a very clear roadmap for economies wishing to strengthen and build their life sciences capacity. This can actually be seen in one of the new economy additions to the Index, Israel. Looking at Figure XXVIII and performance for the creative content sector, it is a similar story and quite clear that many of the economies sampled in the Index are not maximizing the potential economic gains to be had from a strong copyright environment and protecting creativity. Like with Category 2: Copyrights, Related Rights and Limitations and Category 5: Enforcement of the Index, the descent from the top performers is quite steep. A clear majority of the Index economies (22) fail to achieve 50% of the available score. As is illustrated by a number of correlations in the accompanying Statistical Annex, economies that do not offer strong protection for the creative content industries tend to see less creative output, fewer theatre admissions, and less online creativity. The economic costs of this are very real. Across the world the creative economy makes up a growing proportion of national economic output and employment with contributions to GDP ranging from 2-6% depending on the definitions and sectors studied.18 Data from UNCTAD valued the total global trade in creative goods and services for 2011 at $624billion.19 In international trade the creative economy has matched or outgrown general levels of world GDP in the last decade. Between 2002-2011, growth in the trade of creative goods outpaced global economic growth with creative goods exports averaging annual growth rates of 8.8%.20 The creative sector is a growth sector and economies that are not nurturing it and incentivizing creativity are losing out.

18

UNCTAD (2010), Creative Economy Report 2010, pp. 28-31. UNCTAD (2013), “Trade in creative products reached new peak in 2011, UNCTAD figures show”, May 15 2013, (Accessed August 2013) http://unctad.org/en/pages/newsdetails.aspx?OriginalVersionID=498&Sitemap_x0020_Taxonomy=UN CTAD%20Home;#1385;#International Trade and Commodities;#1547;#Creative Economy Programme;#1851;#Services, development and trade;#1856;#UNCTAD GSF 2013. 20 UNCTAD Statistics, Growth rates of creative goods exports and imports, annual, 2002-2011, (Accessed August 2013) 19

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6. Applying the IP Index: Economy Overviews Introduction This section provides an overview and analysis of each individual economy’s score in all 30 indicators. In addition to the scores, each economy overview includes a summary of key areas of strengths and weaknesses in the national IP environment. Specific challenges, debates, and issues relating to each category are discussed in more detail in a separate subsection titled “Spotlight on the National IP Environment.” Where relevant for each economy, a separate discussion titled “Other Areas of Note” is included. These discussions focus on areas of IP law and enforcement that are not directly covered in the 30 indicators but nevertheless have a significant impact on an economy’s total IP environment and are relevant to wider issues of innovation, economic development, and job creation. For economies included in previous editions of the Index, an additional discussion titled “Past Editions versus Current Scores” is included, in which the economy’s score in the preceding editions is discussed and contrasted with its current score.

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Algeria Scores Indicator Patents, Related Rights, and Limitations 1. Patent term of protection 2. Patentability requirements 3. Patentability of computer-implemented inventions 4. Pharmaceutical-related patent enforcement and resolution mechanism 5. Legislative criteria and use of compulsory licensing of patented products and technologies 6. Patent term restoration for pharmaceutical products 7. Regulatory data protection term Total Score—Patents Copyrights, Related Rights, and Limitations Copyright (and related rights) term of protection 8. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) 9. Availability of frameworks that promote cooperative action against online piracy 10. Scope of limitations and exceptions to copyrights and related rights 11. Digital rights management legislation 12. Clear implementation of policies requiring proprietary software used on government ICT systems to be licensed software Total Score—Copyrights Trademarks, Related Rights, and Limitations 13. Trademarks term of protection (renewal periods) 14. Nondiscrimination/nonrestrictions on the use of brands in packaging of different products 15. Ability of trademark owners to protect their trademarks: requisites for protection 16. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks 17. Availability of frameworks that promote action against online sale of counterfeit goods Total Score—Trademarks Trade Secrets and Market Access 18. Protection of trade secrets 19. Barriers to market access Total Score—Trade Secrets and Market Access Enforcement

Score

Total Possible Score

1 0 0 0 0 0 0 1

7

0.5221 0.25 0 0.5 0 0.25 1.52

6

1 1 0.25 0.25 0 2.5

5

0.25 0.25 0.5

2

21

Calculated as the average of the minimum terms of protection for anonymous intellectual works (50 years) divided by the baseline term of 95 years.

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20. Physical counterfeiting rates 21. Software piracy rates 22. Civil and procedural remedies 23. Preestablished damages and/or mechanisms for determining the amount of damages generated by infringement 24. Criminal standards including minimum imprisonment and minimum fines 25. Effective border measures Total Score—Enforcement Membership and Ratification of International Treaties 26. WIPO Internet Treaties 27. Singapore Treaty on the Law of Trademarks 28. Patent Law Treaty 29. At least one free trade agreement with substantive and/or specific IP provisions such as chapters on IP and separate provisions on IP rights provided it was signed after WTO/TRIPS membership Total Score—Treaties Total Overall Score

0.3722 0.1523 0.25 0.25 0.25 0.25 1.52

6

1 0 0.5 0 1.5 8.54

4 30

Strengths and Weaknesses Key Areas of Strength  Rudimentary legal framework for enforcement of IP rights  Policy makers have made calls for reform efforts

Key Areas of Weakness  Key pharmaceutical IP rights missing  No linkage mechanism or ability to enforce pharmaceutical patent rights  High levels of piracy—estimated software piracy rate of 85%  Major holes in legal framework for enforcing copyrights  Difficult localization policies in place

Spotlight on the National IP Environment Patents, Related Rights, and Limitations 4. Pharmaceutical-related patent enforcement and resolution mechanism: Algeria does not have in place a dedicated enforcement and resolution mechanism at the regulatory and market approval levels. Rights holders report that follow-on products have been approved despite patent protection being in place for reference products. Apart from a lack of an effective mechanism at the administrative and regulatory level, enforcement through the judiciary is equally challenging, in effect rendering patent protection for biopharmaceuticals moot.

22

Calculated based on the Global Measure of Physical Counterfeiting, where Algeria ranked 14 out of 38 economies mapped. 23 Based on software piracy rates (85%) compiled by the BSA.

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6. Patent term restoration for pharmaceutical products and 7. Regulatory data protection term: Algeria does not provide for patent term restoration for pharmaceutical products. In addition, there is currently no regulatory data protection term for submitted clinical research and data as part of a marketing approval application. Copyrights, Related Rights, and Limitations 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking); 10. Availability of frameworks that promote cooperative action against online piracy; and 12. Digital rights management legislation: Algeria provides a relatively basic framework for the protection and enforcement of copyright online. The Copyrights and Neighboring Rights Act provides exclusive rights enforcement mechanisms for rights holders, but these are not specific to the online environment. Algeria does not provide a notice and takedown mechanism, and there is no specific or comprehensive digital rights management legislation in place. The copyright enforcement environment is very difficult, with exceedingly high levels of counterfeit content in circulation. Estimates by the Algerian National Copyright Office put the total copyright piracy level at 60%. Looking at software piracy, the BSA’s latest estimate is that 85% of software in Algeria was pirated; this figure has held roughly steady for the past 8 years. Ad hoc enforcement campaigns have been launched by the authorities, but, overall, the copyright enforcement environment remains difficult. Trade Secrets and Market Access 20. Barriers to market access: Algeria has a number of localization policies in place that indirectly subject a rights holder to IP sharing in order to effectively access the Algerian market. For example, in the biopharmaceutical sector, the Algerian government has banned the import of 800+ drug products that have locally produced equivalents, and price preferences are in place (up to 25%) for domestic suppliers. More broadly, a majority (51%) ownership is required for commercial entities involved in foreign trade by local Algerian shareholders. In effect, this means that to be able to operate and compete effectively in the Algerian market, rights holders are required to partner with local entities and manufacture locally. Enforcement 23. Civil and procedural remedies; 24. Preestablished damages and/or mechanisms for determining the amount of damages generated by infringement; and 25. Criminal standards including minimum imprisonment and minimum fines: Enforcing IP rights in Algeria is a challenge. Basic civil remedies, damages, and criminal remedies are all in place in the relevant copyright, patent, and trademark laws. However, the actual enforcement, availability, and application of these laws is difficult. Local industry and international evaluations have cited a significant presence of counterfeit products, particularly consumer goods including cosmetics and basic electronics. A 2012 survey by Hewlett Packard in Algeria suggests that rates of counterfeit printer cartridges are some of the highest in Africa, with 37% of businesses having purchased or been offered counterfeit printing equipment. Furthermore, legal analysis suggests criminal prosecution of trademark and IP-related infringement is unusual unless it involves a clear public health concern. News reports 55

suggest that the Algerian government has recognized the severity of the situation and is moving to introduce new anticounterfeiting legislation. Customs Directorate General Mohamed Abdou Bouderbala was cited in April 2014 as saying: “an interministerial committee has been set up to draft the anti-counterfeiting law in order to better address and fight against this scourge [counterfeiting], which is hurting the national economy.” At the time of research, no new anticounterfeiting law had been enacted. Membership and Ratification of International Treaties Algeria scores low in its participation in and ratification of international treaties because it has not ratified the Patent Law Treaty, is not party to the Singapore Treaty on the Law of Trademarks, and has not concluded an FTA with substantial IP provisions. Algeria is currently not a member of the World Trade Organization and not a signatory of the TRIPS agreement. Algeria is signatory to and has ratified the WIPO Internet Treaties.

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Argentina Scores Indicator Patents, Related Rights, and Limitations 1. Patent term of protection 2. Patentability requirements 3. Patentability of computer-implemented inventions 4. Pharmaceutical-related patent enforcement and resolution mechanism 5. Legislative criteria and use of compulsory licensing of patented products and technologies 6. Patent term restoration for pharmaceutical products 7. Regulatory data protection term Total Score—Patents Copyrights, Related Rights, and Limitations 8. Copyright (and related rights) term of protection 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) 10. Availability of frameworks that promote cooperative action against online piracy 11. Scope of limitations and exceptions to copyrights and related rights 12. Digital rights management legislation 13. Clear implementation of policies requiring proprietary software used on government ICT systems to be licensed software Total Score—Copyrights Trademarks, Related Rights, and Limitations 14. Trademarks term of protection (renewal periods) 15. Nondiscrimination/nonrestrictions on the use of brands in packaging of different products 16. Ability of trademark owners to protect their trademarks: requisites for protection 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks 18. Availability of frameworks that promote action against online sale of counterfeit goods Total Score—Trademarks Trade Secrets and Market Access 19. Protection of trade secrets 20. Barriers to market access Total Score—Trade Secrets and Market Access Enforcement

Score

Total Possible Score

1 0 0.25 0 0 0 0 1.25

7

0.6324 0.25 0 0.25 0 0 1.13

6

1 1 0.5 0.5 0.25 3.25

5

0.25 0.25 0.5

2

24

Calculated as the average of the minimum terms of protection for anonymous intellectual works belonging to institutions, corporations, or legal persons (50 years) and for authorship (70 years), divided by the baseline term of 95 years.

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21. Physical counterfeiting rates 22. Software piracy rates 23. Civil and procedural remedies 24. Preestablished damages and/or mechanisms for determining the amount of damages generated by infringement 25. Criminal standards including minimum imprisonment and minimum fines 26. Effective border measures Total Score—Enforcement Membership and Ratification of International Treaties 27. WIPO Internet Treaties 28. Singapore Treaty on the Law of Trademarks 29. Patent Law Treaty 30. At least one free trade agreement with substantive and/or specific IP provisions such as chapters on IP and separate provisions on IP rights provided it was signed after WTO/TRIPS membership Total Score—Treaties Total Overall Score

0.4725 0.3126 0.25 0 0.25 0.5 1.78

6

1 0 0 0 1 8.91

4 30

Strengths and Weaknesses Key Areas of Strength  Fairly strong trademark legal framework present, including protection for unregistered marks  Elemental legal framework for enforcement of IP rights  Signatory to WIPO Internet Treaties

Key Areas of Weakness  Key pharmaceutical IP rights missing  Compulsory license framework overly broad  Extensive patent backlogs  Major holes in legal framework for enforcing copyrights  Lacks Internet service provider (ISP) liability/notice and takedown system  Relatively high rates of counterfeiting  Judicial procedure slow and court decisions nontransparent/deterrent

Spotlight on the National IP Environment Past Editions versus Current Scores Argentina’s overall score dropped slightly from 31% (with a score of 9.2) of the total possible score in the 3rd edition to 30% (with a score of 8.91) in the 4th edition. The drop in score is mainly a result of the replacement of the GTRIC-e measure of physical counterfeiting with the Global Physical Counterfeiting Measure. Although various ad hoc raids and seizures of counterfeit goods took place in 2015, very little movement occurred overall in the legislative or enforcement spheres toward reducing piracy and counterfeiting. Both continue to be major problems and are widely prevalent both in the physical marketplaces and online. 25

Calculated based on the Global Measure of Physical Counterfeiting, where Argentina ranked 18 out of 38 economies mapped. 26 Based on software piracy rates (69%) compiled by the BSA.

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Patents, Related Rights, and Limitations 2. Patentability requirements: Argentine patentability requirements include novelty, inventive step, and industrial application. The patent law approaches process patents strictly and, generally speaking, process and method of treatment patent claims rarely meet the industrial application requirement and are difficult to defend in Argentine courts. The 2012 Guidelines for the Examination of Patent Applications on Pharmaceutical Inventions further tighten requirements for the patentability of pharmaceutical inventions, including making second medical use claims unavailable. In 2015, Congress considered a proposal to link approval of pharmaceutical patents to wider public health objectives that would go beyond a decision from the patent office, INPI, based on industrial criteria, to also include the opinion of the Ministry of Health based on cost-benefit analysis. As a result, industry reports suggest that companies face significant challenges to securing and enforcing patent protection for biopharmaceutical and biotech inventions in Argentina. 4. Pharmaceutical-related patent enforcement and resolution mechanism: Argentina does not have an effective patent enforcement and resolution mechanism. Under Articles 83 and 87 of Law No. 24,481, preliminary injunctions are available to rights holders as a means of patent enforcement during the course of an infringement trial. In practice, however, rights holders report that despite these provisions they are typically unable to obtain injunctive relief in a timely manner during the course of infringement proceedings. Copyrights, Related Rights, and Limitations 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking): Argentina provides for general exclusive rights for authors and creators; however, there is no clear reference in the law to copyrights in the online environment. Digital piracy remains a major threat to the copyright industries. Illegal operation of cyberlockers, peer-to-peer (P2P) file sharing, and direct downloads (for example, Cuevana.tc and Argentinawarez.com) remain the major infringement methods used. Software piracy rates continue to be quite high, with no improvement or change in the overall situation. Argentina also suffers from a lack of adequate resources and support (for example, special police crime units dedicated to online piracy) for the enforcement of copyrights pertaining to the online sphere. 10. Availability of frameworks that promote action against online piracy: No specific legislation is in place for ISP liability relating to online piracy; no notice and takedown requirement are in place either. Courts tend to take the position that an ISP can be found liable for online infringement only if it has acted with “malice or negligence.” At present, industry notifications receive very little response from ISPs. Rights holders must approach the court for a formal injunction in order to prevent online copyright infringement; recourse through the courts, however, is poor. While some ISPs have special procedures for processing rights holders’ claims, others still require a judicial order before taking any action. As noted in the previous version of the Index, a draft bill addressing ISP liability, which was submitted to the Argentine Congress in March 2013, provides only a partial solution. Under the proposed measure, ISPs would be held liable for infringing content if they have knowledge and

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do not remove access to it; however, such knowledge must be based on a court order and not merely on notice from rights holders. 11. Scope of limitations and exceptions to copyrights and related rights: Argentina provides for exceptions to copyright but does not have a judicial doctrine in line with the Berne three-step test. Trademarks, Related Rights, and Limitations 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks: Argentine Trademark Law provides a basic legal framework for the protection of rights holders’ exclusive rights. Although trademark enforcement in Argentina is generally poor and generally lacking dedicated efforts to combat counterfeits, recent examples of ad hoc efforts exist. In 2015, several customs and police raids and seizures occurred that targeted consumer and household products in particular. Enforcement 23. Civil and procedural remedies; 24. Preestablished damages and/or mechanisms for determining the amount of damages generated by infringement; and 25. Criminal standards including minimum imprisonment and minimum fines: As noted in previous editions of the Index, Argentina has in place a basic framework for civil remedies and criminal standards. The Civil Code provides for damages in general but contains no specific reference to IP rights, and injunctive relief is available in certain areas (for example, trade secrets, patents, and utility models). Preliminary measures are executed quickly in specific areas such as software; however, in many cases, especially in relation to pharmaceuticals, the process is still drawn out. Criminal courts are directing some focus to physical and online counterfeiting and piracy. Argentina’s criminal enforcement regime, however, still suffers from nondeterrent or laggard judgments, with courts often assigning the minimum penalties provided for in the law, omitting penalties entirely from the judgment, or postponing the judgment. These deficiencies in the court system are the result of inadequate human resources and poor infrastructure as well as a culture of viewing criminal penalties as mere formalities in cases of IP infringement. Membership and Ratification of International Treaties Argentina has a low score for its participation and ratification of international treaties. Argentina has signed and ratified the WIPO Internet Treaties, but it has not joined the Singapore Treaty on the Law on Trademarks or the Patent Law Treaty, and it has not concluded any major FTA post-TRIPS membership that involves substantial provisions on IP rights.

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Australia Scores Indicator Patents, Related Rights, and Limitations 1. Patent term of protection 2. Patentability requirements 3. Patentability of computer-implemented inventions 4. Pharmaceutical-related patent enforcement and resolution mechanism 5. Legislative criteria and use of compulsory licensing of patented products and technologies 6. Patent term restoration for pharmaceutical products 7. Regulatory data protection term Total Score—Patents Copyrights, Related Rights, and Limitations 8. Copyright (and related rights) term of protection 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) 10. Availability of frameworks that promote cooperative action against online piracy 11. Scope of limitations and exceptions to copyrights and related rights 12. Digital rights management legislation 13. Clear implementation of policies requiring proprietary software used on government ICT systems to be licensed software Total Score—Copyrights Trademarks, Related Rights, and Limitations 14. Trademarks term of protection (renewal periods) 15. Nondiscrimination/nonrestrictions on the use of brands in packaging of different products 16. Ability of trademark owners to protect their trademarks: requisites for protection 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks 18. Availability of frameworks that promote action against online sale of counterfeit goods Total Score—Trademarks Trade Secrets and Market Access 19..Protection of trade secrets 20. Barriers to market access Total Score—Trade Secrets and Market Access Enforcement

Score

Total Possible Score

1 0.75 1 0.75 1 1 0.5 6.0

7

0.6327 1 0.75 1 1 0.75 5.13

6

1 0 1 0.75 0.5 3.25

5

0.75 1 1.75

2

27

Calculated as the average of the term for literary, dramatic, musical, and artistic works (70 years) and the term for broadcasts (50 years), divided by the baseline term of 95 years.

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21. Physical counterfeiting rates 22. Software piracy rates 23. Civil and procedural remedies 24. Preestablished damages and/or mechanisms for determining the amount of damages generated by infringement 25. Criminal standards including minimum imprisonment and minimum fines 26. Effective border measures Total Score—Enforcement Membership and Ratification of International Treaties 27. WIPO Internet Treaties 28. Singapore Treaty on the Law of Trademarks 29. Patent Law Treaty 30. At least one free trade agreement with substantive and/or specific IP provisions such as chapters on IP and separate provisions on IP rights provided it was signed after WTO/TRIPS membership Total Score—Treaties Total Overall Score

0.8728 0.7929 1 0.75 0.75 0.5 4.66

6

1 1 1 1 4 24.79

4 30

Strengths and Weaknesses Key Areas of Strength  Patent term restoration for pharmaceutical products  New notice + notice mechanism and graduated warning system in place  Scope of limitations and exceptions to copyrights and related rights  Digital rights management legislation  Relatively low counterfeiting and piracy rates

Key Areas of Weakness  Limited scope of patentability for biotech inventions  Lack of clarity on patentability of computer-implemented inventions (CIIs)  Restrictions on the use of brands, trademarks, and trade dress in packaging  Insufficient criminal penalties  Lack of ex officio authority for customs officials

Spotlight on the National IP Environment Past Editions versus Current Scores Australia’s overall score rose slightly from 82% (with a score of 24.7) in the 3rd edition of the Index to 83% (with a score of 24.79) in the 4th edition. Positive movement forward in the copyright sphere with a new ability to address foreignhosted infringing sites as well as a new graduated warning (notice plus notice) system, along with supporting court decisions, should strengthen the ability to address online piracy in the economy. Australia’s score also increased for indicator 21, as a result of the replacement of the GTRIC-e measure of physical counterfeiting with the Global Physical Counterfeiting Measure. Nevertheless, in the area of biotech invention patentability, the Australian High Court ruled out the patentability of an important 28

Calculated based on the Global Measure of Physical Counterfeiting, where Australia ranked 33 out of 38 economies mapped. 29 Based on software piracy rates (21%) compiled by the BSA.

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component of biotechnology inventions, the ability to patent isolated generic material. In August 2015, the Australian government announced that the Productivity Commission would be conducting a far-ranging review of the country’s IP laws. The results of this review are expected to be published in late summer 2016. Patents, Related Rights, and Limitations 2. Patentability requirements: In 2015, the Australian High Court reversed the 2014 ruling of the Federal Court that had upheld the patentability of isolated genetic material in D’Arcy v. Myriad Genetics. In the decision, the court found that isolation of genetic material does not constitute an inventive step because it considered that the protected substance—the genetic material—is essentially the same information as in its natural form. This decision weakens the patentability of biotechnology and diagnostic-related inventions in a manner similar to the United States, where a decision by the U.S. Supreme Court in 2013 also invalidated Myriad’s claims on isolated genes. In addition, the IP office reported that 2014 saw a 13% drop in patent applications from 2013, particularly among innovation patents (which saw a near 10% drop). 3. Patentability of computer-implemented inventions: Recent case law by the Federal Court suggests that the patent office is moving toward a stricter view of software patentability that would raise the bar for CII beyond the current requirement of producing a physical effect (Research Affiliates LLC v. Commissioner of Patents, 2013, and RPL Central Pty Ltd v. Commissioner of Patents, 2013). However, the courts’ stance and the patent office’s official policy on the issue remain undetermined. Although the appeal was heard in 2015, the Full Court has not yet ruled on RPL v. Commissioner of Patents. As such, Australia’s position on the extent to which software must be linked to an invention and/or the extent of the physical effect it must have to qualify as patentable is not yet resolved. Copyrights, Related Rights, and Limitations 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) and 10. Availability of frameworks that promote action against online piracy: Copyright Act amendments enacted in 2015 introduce a new websiteblocking mechanism that fills a gap in the existing law in relation to foreign-hosted websites, in which rights holders may apply for and receive injunctions from the Federal Court regarding websites or “online locations” whose “primary purpose” is to infringe or facilitate infringement of copyright. The law applies only to websites located outside Australia. ISPs (known as CSPs in Australia) that cooperate in blocking access to the sites are not held liable for the infringement. In addition, an industry code created by Australia’s Communications Alliance was finalized in 2015. The code introduces a kind of graduated warning system in which rights holders may notify ISPs of infringing IP addresses, based on which ISPs then send a series of three notifications to users linked to the IP address. If, following these steps, no action is taken by infringing users, the ISP may disclose the IP address to the rights holder by way of a court order. The system is intended as a warning and education platform. However, given that the website-blocking mechanism involves a court order and the new industry platform does not involve takedown of infringing content, neither

63

represent a true notice and takedown system. As a result, key gaps and loopholes in the existing notice and takedown system continue to exist. 13. Clear implementation of policies requiring proprietary software used on government ICT systems to be licensed software: Evidence suggests that certain government departments and bodies have not implemented software licensing in a comprehensive manner. In 2015, the South Australian government was sued by software provider Global Health for not renewing its license on an electronic patient administration system used extensively across regional hospitals. The basis for the government’s refusal to renew the license was so-called copyright exceptions for crown use and public benefit including state governments. The lawsuit is currently in the early stages with no further progress made at the time of research. Trademarks, Related Rights, and Limitations 15. Nondiscrimination/nonrestrictions on the use of brands in packaging: Since 2012, Australia has restricted the use of trademarks on retail packaging of tobacco products, requiring the products to be sold in nondescript packaging and limiting the use of trade dress elements such as color and design. The measure severely undermines the rights of trademark owners, and it has ignited a global debate on the use of plain packaging that threatens to affect trademark owners across different sectors and economies. Since the introduction of the law, a number of economies have brought action against Australia in the WTO on the basis that the law violates its WTO commitments, specifically under the Technical Barriers to Trade, TRIPS, and General Agreement on Tariffs and Trade (GATT) Agreements. In 2015, the WTO heard oral arguments from the four economies that issued complaints against the law. Enforcement 26. Effective border measures: Under the Copyright and Trade Marks Acts, customs officials are not given ex officio authority to act against goods they suspect of infringement; a rights holder must first submit a notice objecting to the importation of infringing goods before an official may detain or suspend the goods. With a notice from the rights holder, officials are authorized to seize in transit only a certain type of goods called “transhipped goods”; other types of in-transit goods are not officially subject to seizure because transhipped goods remain under customs control while being shipped through Australia to other destinations, making them subject to seizure if a notice of objection is in place and the rights holder can demonstrate that the goods are infringing. Although the Raising the Bar Act of 2012 introduced amendments to strengthen customs action, no specific amendments relate to the ex officio actions of customs officials. There is a reported increase in the number and quality of imported counterfeit goods in circulation in Australia. Membership and Ratification of International Treaties Australia receives a full score in this category, having signed and ratified all major international IP treaties as well as having concluded post-TRIPS FTAs with substantial IP provisions. Australia is also one of the negotiating parties to the TransPacific Partnership (TPP). Negotiations concluded in October 2015.

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Brazil Scores Indicator Patents, Related Rights, and Limitations 1. Patent term of protection 2. Patentability requirements 3. Patentability of computer-implemented inventions 4. Pharmaceutical-related patent enforcement and resolution mechanism 5. Legislative criteria and use of compulsory licensing of patented products and technologies 6. Patent term restoration for pharmaceutical products 7. Regulatory data protection term Total Score—Patents Copyrights, Related Rights, and Limitations 8. Copyright (and related rights) term of protection 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) 10. Availability of frameworks that promote cooperative action against online piracy 11. Scope of limitations and exceptions to copyrights and related rights 12. Digital rights management legislation 13. Clear implementation of policies requiring proprietary software used on government ICT systems to be licensed software Total Score—Copyrights Trademarks, Related Rights, and Limitations 14. Trademarks term of protection (renewal periods) 15. Nondiscrimination/nonrestrictions on the use of brands in packaging of different products 16. Ability of trademark owners to protect their trademarks: requisites for protection 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks 18. Availability of frameworks that promote action against online sale of counterfeit goods Total Score—Trademarks Trade Secrets and Market Access 19. Protection of trade secrets 20. Barriers to market access Total Score—Trade Secrets and Market Access Enforcement

Score

Total Possible Score

1 0 0.25 0 0 0 0 1.25

7

0.6330 0.25 0 0.5 0.25 0.25 1.88

6

1 1 0.5 0.5 0.25 3.25

5

0.5 0.75 1.25

2

30

Calculated as the average of the term for software (50 years) and the term for all other works (70 years), divided by the baseline term of 95 years.

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21. Physical counterfeiting rates 22. Software piracy rates 23. Civil and procedural remedies 24. Preestablished damages and/or mechanisms for determining the amount of damages generated by infringement 25. Criminal standards including minimum imprisonment and minimum fines 26. Effective border measures Total Score—Enforcement Membership and Ratification of International Treaties 27. WIPO Internet Treaties 28. Singapore Treaty on the Law of Trademarks 29. Patent Law Treaty 30. At least one free trade agreement with substantive and/or specific IP provisions such as chapters on IP and separate provisions on IP rights provided it was signed after WTO/TRIPS membership Total Score—Treaties Total Overall Score

0.5331 0.532 0.25 0.25 0.25 0.5 2.28

6

0 0 0.5 0 0.5 10.41

4 30

Strengths and Weaknesses Key Areas of Strength  Basic IP framework introduced in the mid-1990s includes 20-year patent protection  10-year minimum term of patent protection in place for administrative delays  Ex officio powers granted to customs officials under the Patent and Trademark Act

Key Areas of Weakness  Localization requirements and forced sharing of technology for biopharmaceutical production intensified in 2014/15  Patentability barriers still in place through ANVISA review of pharmaceutical applicants—confirmed in 2015 court cases  Regulatory data protection not available for human-use products  Patent term restoration not available  Low rate of membership or ratification of international IP treaties

Spotlight on the National IP Environment Past Editions versus Current Scores Brazil’s overall score has dropped from 36% of the total possible score (with a score of 10.86) in the 3rd edition of the Index to 34.7% (10.41) in this edition. This decline primarily results from a reduction in the score for indicators 20 and 21, measuring IPbased barriers to market entry and physical trade-related counterfeiting, respectively. No major piece of IP-related legislation was passed in 2015. However, there were a number of negative judicial developments with potentially precedent-setting rulings relating to existing patentability barriers and the “mailbox” patents invalidated by the 31

Calculated based on the Global Measure of Physical Counterfeiting, where Brazil ranked 20 out of 38 economies mapped. 32 Based on software piracy rates (50%) compiled by the BSA.

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Brazilian Patent Office (INPI) in 2013. One positive piece of news was the introduction of a new industry-led online antipiracy campaign backed by a coalition of some of the largest content and brand owners in Brazil and internationally. Patents, Related Rights, and Limitations 2. Patentability requirements: A number of judicial developments took place with regard to patentability requirements. As noted in previous editions of the Index, the Brazilian National Health Surveillance Agency (ANVISA) continues to have the right to provide prior consent to pharmaceutical patents that are being examined by INPI. Consequently, decisions on whether to grant a pharmaceutical patent are based on examination not solely by patent specialists and officials at INPI, but also by ANVISA. This introduces a requirement of dual examination, which violates the TRIPS Agreement. The exact meaning and nature of ANVISA’s right to prior consent have been questioned in a court of law. In fact, in a number of these cases, ANVISA’s authority has been questioned and injunctions granted. This trend was reversed in 2015. In June 2015, a potentially landmark decision was issued by a Federal District Court in Rio de Janeiro. The decision held that ANVISA was in fact permitted to review pharmaceutical patents and the insertion of ANVISA into the review process was an essential element in safeguarding public health. The ruling also held that a denial by ANVISA of a patent application should result in a refusal by the INPI. Wide adoption of this ruling and its interpretation of the relevant laws and ANVISA’s role would exacerbate what is already a challenging environment for biopharmaceutical innovators in Brazil. In 2015, there were also new developments in the ongoing “mailbox” court cases relating to pharmaceutical product patents filed in the mid1990s. These patents were originally invalidated and nullified by the INPI in 2013, with a number of rights holders filing suit to uphold these patents. Unlike 2014, when a number of initial court decisions favored innovators, 2015 saw a Court of Appeals decision support the INPI position to uphold the invalidation. Like the ANVISA case, this decision sets a potentially dangerous precedent that could undermine the current 10-year minimum patent period guarantee from grant; a guarantee is in place to safeguard innovators for the long delays and backlog at INPI that significantly reduces the 20-year statutory period of exclusivity. 6. Patent term restoration for pharmaceutical products and 7. Regulatory data protection term: As noted in previous editions of the Index, Brazil does not provide for patent term restoration for pharmaceutical products, and RDP is still available only for fertilizers, agrochemical products, and pharmaceuticals for veterinary use. Pharmaceuticals for human use are not covered by existing regulations. The lack of these biopharmaceutical IP rights continues to undermine the development of the full potential of the life sciences sector in Brazil.

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Copyrights, Related Rights, and Limitations 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking); 10. Availability of frameworks that promote cooperative action against online piracy; and 12. Digital rights management legislation: At the time of research, no significant new copyright or related legislation had been passed. Implementing regulations to the Marco Civil da Internet (Internet Bill of Rights, Law No. 12,965) have yet to be released, with a lengthy and wide-ranging consultation having taken place during the first quarter of 2015. Overall, Brazil continued to struggle with online piracy. Industry and media reports suggest the scale of the issue was still significant. The Brazilian Software Association (ABES, Associação Brasileira das Empresas de Software) reported in July 2015 that it had taken action against over 35,000 websites (including online retailers and auction sites) offering illegal software—an increase of 35% over the same period in 2014. Similarly, the Entertainment Software Association reported that Brazil ranked number one in the world for P2P infringement of non-PC-based video games. On a positive note, a new industry-led online antipiracy campaign called “click original” was launched by the Brazilian National Forum Against Piracy and Illegality (Fórum Nacional Contra a Pirataria e a Ilegalidade, FNCP), a coalition of some of the largest content and brand owners in Brazil and around the world. On the one hand, this public initiative provides rights holders the opportunity to submit information on potential infringement of their brand; and on the other hand, it gives the public at large and consumers a source of evidence and statistics on the scale of online piracy. At the time of research, this information portal estimated the value of online piracy reported by mid-2015 in Brazil at BRL560 million, on pace to exceed the total reported value of BRL800 million for 2014. The major sectors affected include perfume and cosmetics, toys (including video games), and medicines. Trade Secrets and Market Access 20. Barriers to market access: Brazilian foreign investment policies have traditionally emphasized local content requirements and encouraged efforts aimed at increasing and adding value to local production. This trend has accelerated since 2011 under the government’s Plano Maior Brazil. For instance, Decree 8304 (2014) introduced local content requirements to qualify for export assistance, whereby a 3% subsidy is granted to products with less than 40% of inputs imported (raised to 65% for some sectors, including pharmaceuticals). Other tax measures for the export of automobile and ICT products for which most production stages are carried out in Brazil have also been in place since 2012. Brazil has also tied the degree of local production to preferential prices in government procurement. For example, 60% of government funding spent on tenders for the roll-out of 4G wireless networks must be applied to locally sourced infrastructure and technical services, with this figure required to rise to 70% by 2017. Increasingly, many of these localization policies are targeting the sharing of IP and technology transfer. For example, as part of a wider policy of encouraging investment and capacity building in biopharmaceutical R&D and manufacturing, the Brazilian government has been seeking to partner with multinational innovators through public-private partnerships (so-called PDPs). Most recently, a new PDP regulation (Portaria 2531/14) was adopted with the stated objective of making existing partnership selection processes more transparent and 68

predictable. However, these new regulations also contain requirements that introduce more invasive requirements for transfer of know-how and technologies. Specifically, private entities involved in a PDP must transfer the Drug Master File or the master cell bank (for small molecule and biological products, respectively). Membership and Ratification of International Treaties Brazil scores low in its participation in and ratification of international treaties, mostly because it is not a contracting party to the WIPO Internet Treaties or the Singapore Treaty on the Law of Trademarks, and it has not concluded an FTA with substantial IP provisions since it acceded to TRIPS. Also, while Brazil is a signatory, it has not ratified the Patent Law Treaty.

69

Brunei Scores Indicator Patents, Related Rights, and Limitations 1. Patent term of protection 2. Patentability requirements 3. Patentability of computer-implemented inventions 4. Pharmaceutical-related patent enforcement and resolution mechanism 5. Legislative criteria and use of compulsory licensing of patented products and technologies 6. Patent term restoration for pharmaceutical products 7. Regulatory data protection term Total Score—Patents Copyrights, Related Rights, and Limitations 8. Copyright (and related rights) term of protection 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) 10. Availability of frameworks that promote cooperative action against online piracy 11. Scope of limitations and exceptions to copyrights and related rights 12. Digital rights management legislation 13. Clear implementation of policies requiring proprietary software used on government ICT systems to be licensed software Total Score—Copyrights Trademarks, Related Rights, and Limitations 14. Trademarks term of protection (renewal periods) 15. Nondiscrimination/nonrestrictions on the use of brands in packaging of different products 16. Ability of trademark owners to protect their trademarks: requisites for protection 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks 18. Availability of frameworks that promote action against online sale of counterfeit goods Total Score—Trademarks Trade Secrets and Market Access 19. Protection of trade secrets 20. Barriers to market access Total Score—Trade Secrets and Market Access Enforcement

Score

Total Possible Score

1 0.75 0.75 0 0 1 0 3.5

7

0.5333 0.25 0 0.25 0.25 0.25 1.53

6

1 1 0.5 0.5 0 3

5

0.25 1 1.25

2

33

50 years basic term for unidentified works and software divided by the baseline term of 95 years.

70

21. Physical counterfeiting rates 22. Software piracy rates 23. Civil and procedural remedies 24. Preestablished damages and/or mechanisms for determining the amount of damages generated by infringement 25. Criminal standards including minimum imprisonment and minimum fines 26. Effective border measures Total Score—Enforcement Membership and Ratification of International Treaties 27. WIPO Internet Treaties 28. Singapore Treaty on the Law of Trademarks 29. Patent Law Treaty 30. At least one free trade agreement with substantive and/or specific IP provisions such as chapters on IP and separate provisions on IP rights provided it was signed after WTO/TRIPS membership Total Score—Treaties Total Overall Score

0.8234 0.3435 0.25 0.25 0.5 0 2.16

6

0 0 0 0 0 11.44

4 30

Strengths and Weaknesses Key Areas of Strength  Major IP reforms in the past few years including establishing a dedicated IP Office (BruIPO)  New Patents Order introduced (2011)  Copyright Amendments (2013) that increase penalties (including fines and prison sentences) for copyright infringement  Stronger enforcement against physical counterfeiting since 2012  Removed from U.S. Trade Representative’s (USTR) Special 301 Report

Key Areas of Weakness  Life sciences IP rights lacking  Regulatory data protection not available  Compulsory license framework overly broad  Limited framework for addressing online piracy and circumvention devices  No notice and takedown system for copyright or trademarks  High software piracy rates  Slow judicial procedures and lack of IP-related case law and prosecutions  Weak border enforcement measures with no ex officio authority in place  Not a contracting party to any of the major international IP treaties referenced in the Index

Spotlight on the National IP Environment General Overview

34

Calculated based on the Global Measure of Physical Counterfeiting, where Brunei ranked 31 out of 38 economies mapped. 35 Based on software piracy rates (66%) compiled by the BSA.

71

Brunei achieves an overall score of 11.44, representing 38% of the total available Index score. Although it still faces a number of challenges, Brunei has over the past few years taken tangible positive steps to improve its national IP environment. Reforms to patent and copyright laws, the introduction of a new dedicated IP office, and stronger enforcement against physical piracy are all noticeable improvements to the national IP environment. As a direct result of these steps, Brunei was removed from the USTR’s Special 301 Report watch list in 2013. Brunei has also committed to join the WIPO Internet Treaties and (like other ASEAN economies) to accede to the Madrid Protocol for the international registration of trademarks. Brunei is also a negotiating party to the TPP. Accession to this treaty and adherence to its IP standards will provide a significant boost to Brunei’s national IP environment and Index score. Still, a number of significant challenges remain. Life sciences IP rights are quite limited, with no RDP or patent linkage system in place. Enforcement against online piracy and physical counterfeiting is a challenge, especially with relatively weak border measures. Patents, Related Rights, and Limitations 2. Patentability requirements and 3. Patentability of computer-implemented inventions: Brunei’s Patent Order introduced in 2011 provides for the protection of patents if they meet the international standards and requirements of novelty, inventiveness, and susceptibility to industrial application. Software and CIIs are not excluded, and it would appear computer implemented inventions are patentable if they meet the general patentability requirements. However, it is not clear in practice which inventions are excluded from or granted patent protection. For example, patent application statistics from WIPO suggest that only a small number of patent applications have been granted in the biomedical or IT field. 5. Legislative criteria and use of compulsory licensing of related products and technologies: The Patents Order 2011 includes a very broad government-use provision for which there are no clearly defined limits. Additionally, there does not seem to be a strong or available recourse mechanism in place. 6. Patent term restoration for pharmaceutical products and 7. Regulatory data protection term: Brunei does not provide any clear provision for regulatory data protection or data exclusivity for submitted biopharmaceutical test data. There are also no provisions for the restoration of any patent term lost because of regulatory delays. The agreed text of the TPP released in November 2015 contains very clear requirements that contracting parties make available a term of patent restoration for unreasonable delays and a minimum period of five years’ protection for submitted clinical data (with eight years for biologics) as part of a market registration application. As a negotiating party to the TPP, Brunei will be able to strengthen its IP framework as it relates to the life sciences by introducing these two critical IP rights. Copyrights, Related Rights, and Limitations 10. Availability of frameworks that promote action against online piracy: Brunei does not have in place a notice and takedown system to address online copyright infringement. While the problem was noted by the government as recently as 2012, there are no indications of new attempts or proposals for new primary or secondary legislation. Similarly, there is no evidence that private, ad hoc efforts and cooperation 72

between ISPs and rights holders are taking place. It is worth noting that Brunei may adopt a notice and takedown system in the future as a result of signing and ratifying the TPP agreement. 13. Clear implementation of policies requiring proprietary software used on government ICT systems to be licensed software: As an Asian-Pacific Economic Cooperation (APEC) and ASEAN economy, Brunei committed to implementing and encouraging the government use of licensed software at the 12th APEC Ministerial Meeting in 2000 as well as under the ASEAN-Australia-New Zealand Free Trade Agreement of 2010. However, there is no evidence that a clear government policy is in place or that any active auditing is taking place. The relatively high software piracy figure (66%) as estimated by the BSA in its latest (2014) survey suggests software piracy is still pervasive. Trademarks, Related Rights, and Limitations 15. Nondiscrimination/nonrestrictions on the use of brands in packaging: Brunei does not currently have any plain packaging requirements. The Brunei Health Minister discussed the subject in 2012 and presented it as a potential future policy. The introduction of such a measure applied to any industry would significantly restrict the use of brands, trademarks, and trade dress on retail packaging, undermining the benefits of trademarks to businesses and consumers alike, and setting a negative precedent for intellectual property policy. Enforcement 23. Civil and procedural remedies and 24. Preestablished damages and/or mechanisms for determining the amount of damages generated by infringement: The Patents Order, Trade Marks Law, and Copyright Order provide for civil remedies, which include claims for damages, seizures, and injunctions. These laws provide relief by accounting for profits and damages, but no statutory damages are in place for IP infringement. Moreover, the existing Bruneian IP case law is quite limited. More broadly, the application and enforcement of laws and general availability of judicial remedies remain a challenge in Brunei. For instance, expedited paperless filing in the judiciary was introduced only in 2015. Moreover, enforcing contracts and resolving insolvency are generally problematic with Brunei, which ranks 139th and 88th, respectively, for these 2 categories in the World Bank’s Doing Business 2015 report. 25. Criminal standards including minimum imprisonment and minimum fines: Criminal enforcement against IP infringement in Brunei is still in its early stages, with some positive steps taken in recent years to increase penalties and deterrence. In 2012, the government led several campaigns dedicated to strengthening policing and prosecution of physical counterfeiting, with shops ordered to eliminate counterfeit supplies or be required to shut down. In addition, the 2013 amendments to the Copyright Order have doubled the penalties from $5,000 and 2 years in prison to a possible fine of $10,000 to $20,000 per infringing copy, and up to 5 years in prison. Still, the actual application of these amendments remains to be seen. Up until the time of research, the actual prosecution and handing down of sentences in IP cases are rare, with the 1st copyright piracy case held only in 2011. More broadly, reports suggest that, in some sectors, counterfeit and illicit products make up the majority of the trade. 73

For example, illicit cigarettes make up the vast majority of the domestic market in Brunei, with a 2012 report by Oxford Economics estimating that 89% of consumption consisted of illicit cigarettes. 26. Effective border measures: Neither trademark nor copyright law provides customs officials with clear ex officio authority to act against goods suspected of IP infringement. Section 82 of the Trade Mark law and Sections 109–110 of the Copyright Order require rights holders to submit a notice objecting to the importation of infringing goods before an official may detain or suspend the goods. However, contrary to other jurisdictions, no comprehensive system is in place whereby rights holders can record their registered trademarks and copyrighted goods, forming the basis for action against suspected infringing goods for an extended period of time. The Copyright Order provides a limited time frame of 5 years during which customs authorities will treat specified goods as being infringing goods, yet this order applies only to published and literary works. Section 109 makes clear that this 5-year maximum period is not available for “sound recording or film.” Published public guidance by the EU Commission suggests that the detention of suspected infringing goods by Bruneian customs authorities is rare. Membership and Ratification of International Treaties Brunei scores low in its participation in and ratification of international treaties, mostly because Brunei is not a contracting party to any of the IP treaties included in the Index. However, Brunei is a negotiating party to the TPP and has announced its intention to accede to the WIPO Internet Treaties.

74

Canada Scores Indicator Patents, Related Rights, and Limitations 1. Patent term of protection 2. Patentability requirements 3. Patentability of computer-implemented inventions 4. Pharmaceutical-related patent enforcement and resolution mechanism 5. Legislative criteria and use of compulsory licensing of patented products and technologies 6. Patent term restoration for pharmaceutical products 7. Regulatory data protection term Total Score—Patents Copyrights, Related Rights, and Limitations 8. Copyright (and related rights) term of protection 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) 10. Availability of frameworks that promote cooperative action against online piracy 11. Scope of limitations and exceptions to copyrights and related rights 12. Digital rights management legislation 13. Clear implementation of policies requiring proprietary software used on government ICT systems to be licensed software Total Score—Copyrights Trademarks, Related Rights, and Limitations 14. Trademarks term of protection (renewal periods) 15. Nondiscrimination/nonrestrictions on the use of brands in packaging of different products 16. Ability of trademark owners to protect their trademarks: requisites for protection 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks 18. Availability of frameworks that promote action against online sale of counterfeit goods Total Score—Trademarks Trade Secrets and Market Access 19. Protection of trade secrets 20. Barriers to market access Total Score—Trade Secrets and Market Access Enforcement 21. Physical counterfeiting rates

Score

Total Possible Score

1 0.25 1 0.25 1 0 0.8 4.3

7

0.6336 0.5 0.25 0.25 0.75 1 3.38

6

1 1 0.75 0.75 0.25 3.75

5

1 1 2

2

0.7437

36

Calculated as the minimum term (70 years), divided by the baseline term of 95 years. Calculated based on the Global Measure of Physical Counterfeiting, where Canada ranked 28 out of 38 economies mapped. 37

75

22. Software piracy rates 23. Civil and procedural remedies 24. Preestablished damages and/or mechanisms for determining the amount of damages generated by infringement 25. Criminal standards including minimum imprisonment and minimum fines 26. Effective border measures Total Score—Enforcement Membership and Ratification of International Treaties 27. WIPO Internet Treaties 28. Singapore Treaty on the Law of Trademarks 29. Patent Law Treaty 30. At least one free trade agreement with substantive and/or specific IP provisions such as chapters on IP and separate provisions on IP rights provided it was signed after WTO/TRIPS membership Total Score—Treaties Total Overall Score

0.7538 0.5 0.25 0.5 0.5 3.24

6

1 0 0.5 0 1.5 18.17

4 30

Strengths and Weaknesses Key Areas of Strength  New 70-year copyright term of protection introduced in 2015  New border controls confirmed by the Canadian government to provide ex officio authority to Canadian customs officials  Clear patentability of CIIs

Key Areas of Weakness  Onerous patentability requirements narrow the scope of inventions, particularly for life sciences  Deficient pharmaceutical-related patent enforcement and resolution mechanism under Notice of Compliance procedure; possible change upon implementation of Comprehensive Economic and Trade Agreement (CETA)  Patent term restoration not available; possible change upon implementation of CETA and TPP  No takedown mechanism in ISP notification system

Spotlight on the National IP Environment Past Editions versus Current Scores Canada’s overall score has increased from 60% of the total possible score (with a score of 17.92) in the 3rd edition of the Index to 61% (with a score of 18.17) in the 4th edition. This rise marks the 2nd consecutive year Canada’s score has increased. The overall change in score is the result of clarification by the Canadian government of the ex officio provisions of the Combating Counterfeit Products Act and a slight increase in the estimated rates of physical counterfeiting. As noted in previous editions of the Index, Canada’s score would increase considerably with full 38

Based on software piracy rates (25%) compiled by the BSA.

76

ratification and implementation of both the CETA and TPP agreements, which would affect scores in life sciences related indicators, border enforcement, and international treaties. Patents, Related Rights, and Limitations 2. Patentability requirements: As mentioned in previous editions, since the early to mid-2000s, Canadian Federal Courts have issued a growing number of decisions on the basis of patent utility in relation to pharmaceutical patents. In a high percentage of these cases, courts have ruled that pharmaceutical patents were invalid, despite the fact that these medicines were found to be safe and effective by Health Canada and were being used by hundreds of thousands of Canadian patients. The Canadian standard of utility established through this expanding case law differs from international standards embodied in TRIPS and the Patent Cooperation Treaty, and from practices of patent offices in the United States and EU. The utility test is accompanied by a heightened evidentiary burden, requiring innovators to demonstrate the effectiveness of a pharmaceutical in light of the court’s subjective construed “promise.” The test raises uncertainty as to how much information needs to be disclosed in patent applications, and discriminates against pharmaceutical patents. The heightened standard of utility was not satisfactorily resolved by jurisprudence in 2015. For example, in July 2015, the Federal Court of Appeal upheld a lower court judgment in AstraZeneca Canada Inc. v. Apotex Inc. based on the argument that the promise made in the original patent claim “was neither demonstrated nor soundly predicted at the time the patent was filed.” 4. Pharmaceutical-related patent enforcement and resolution mechanism: As noted in previous editions of the Index, Canada’s existing Patented Medicines Notice of Compliance (PMNOC) regulations do not provide patent holders with an effective right of appeal, and the judicial proceedings determining the merits of the disputed patent or patents is a summary, not full, process. This limits the rights of the patent holder and availability of the full term of protection. However, if ratified and implemented, CETA would introduce a more effective right of appeal for applicants before generic entry into the marketplace. In 2015, the Supreme Court of Canada upheld the verdict in two 2014 Federal Court of Appeal rulings concerning the methodology for determining damages under section 8 of the PM (NOC) Regulations. These rulings (and their affirmation by the Supreme Court in its decision from the bench) have in effect upheld a judicial precedent whereby an innovator drug company could be held to pay damages to multiple manufacturers of a follow-on generic drug product that may together exceed the size of a total hypothetical generic market, despite the government policy rationale that section 8 damages are intended to be compensatory rather than punitive. 7. Regulatory data protection term: As noted in previous editions of the Index, Canada amended its Food and Drugs Act in November 2014 enacting Bill-C17 (“Vanessa’s Law”) to include broad provisions that would allow the Health Minister to disclose confidential business information, including trade secrets, submitted to Health Canada as part of the regulatory approval process for pharmaceutical and medical device products. In 2015, the guidelines to this law were released and have maintained the broad and sweeping powers of the legislation. Specifically, Section 21.1.2 includes the power to disclose confidential business information (including 77

data submitted as part of an application for market and regulatory approval of medicines and medical technologies) to any person without notifying the owner of that information in cases where the Health Minister believes there is a “serious risk of injury to human health.” Questions remain under what circumstances information will be disclosed, despite Health Canada guidelines that reference Canada’s international treaty obligations (specifically TRIPS and NAFTA). Copyrights, Related Rights, and Limitations 8. Copyright (and related rights) term of protection: As part of the annual budget (Economic Action Plan 2015 Act), the Canadian government asked to amend the Copyright Act and to extend the term of copyright for sound recordings to 70 years. This extension was passed by Parliament and received Royal Assent in June 2015. The extension of this copyright term is a clear step in the right direction for bringing the Canadian term of protection for copyright in line with the highest international standards. Canada’s score in this indicator has increased as a result of this new law. Trademarks, Related Rights, and Limitations 15. Nondiscrimination/nonrestrictions on the use of brands in packaging: In its preelection party platform published in autumn 2015, the Liberal Party of Canada stated that, if elected, it would seek to “introduce plain packaging requirements for tobacco products, similar to those in Australia and the United Kingdom.” Following the party’s electoral victory, the Prime Minister included a reference to plain packaging in his mandate letter to the Minister of Health. The introduction of such a measure applied to any industry would significantly restrict the use of brands, trademarks, and trade dress on retail packaging, undermining the benefits of trademarks to businesses and consumers alike, and setting a negative precedent for intellectual property policy. The passage of such legislation would decrease Canada’s score in this indicator from 1 to 0. Enforcement 26. Effective border measures: As noted in previous editions of the Index, Canadian border officials have traditionally not held ex officio powers to search and seize goods suspected of infringing IP rights, and a court order has been required for seizure and detaining of suspected goods by customs officials under both the Copyright Act and the Trade-Marks Act. Bill C-8 (previously known as Bill C-56, and reintroduced in October 2013) was passed by the Canadian Parliament and received Royal Assent in December 2014. This bill introduced more robust border measures, including new civil and criminal options as well as expanded powers for customs officials by, for example, enabling the detention of goods suspected of copyright or trademark infringement. However, while customs officers were given a right of detention, at the time of enactment it was not clear whether in practice this right extended to goods for which rights holders had not made a “request for assistance.” During the June 2015 10th review of the trade policies and practices of Canada through the WTO, the Canadian government clarified this point. In its official, published written responses to questions from other WTO member states, the Canadian government stated that the newly enacted and in-force legislation does in fact provide ex officio authority to customs officers. The Canadian government stated: “The border provisions of the Combating Counterfeit Products Act came into force on January 1, 2015. Under its provisions, border service officers have the authority to seek and detain shipments 78

suspected of containing trademark counterfeit or copyright pirated goods (ex officio authority). The Request for Assistance filed by a rights holder will allow the border service officer to exchange certain information in order for the rights holder to begin a court action to deal with the offending goods.” This full introduction of ex officio authority and actual use by Canada’s customs authorities is a significant step forward for Canada’s IP rights enforcement environment, bringing it in line with international best practices, and has resulted in an increase in Canada’s score on this indicator. Unfortunately, as noted in past editions, the new legislation did not extend to counterfeit goods in transit, which, provided they are not destined for the Canadian market, can continue to pass through Canadian customs largely unimpeded. Membership and Ratification of International Treaties Canada acceded to the WIPO Internet Treaties in May 2014, thereby raising its score by 0.5. It remains a signatory but has not yet ratified the Patent Law Treaty (although the Canadian Parliament passed the relevant amendments last year) and is not a contracting party to the Singapore Treaty on the Law of Trademarks. In September 2014, Canada concluded negotiations for CETA, which includes substantial provisions on IP rights. Once this treaty is acceded to, Canada’s score for this indicator will be raised. Canada’s accession to the TPP would also result in an increase to Canada’s score in the Index.

79

Chile Scores Indicator Patents, Related Rights, and Limitations 1. Patent term of protection 2. Patentability requirements 3. Patentability of computer-implemented inventions 4. Pharmaceutical-related patent enforcement and resolution mechanism 5. Legislative criteria and use of compulsory licensing of patented products and technologies 6. Patent term restoration for pharmaceutical products 7. Regulatory data protection term Total Score—Patents Copyrights, Related Rights, and Limitations 8. Copyright (and related rights) term of protection 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) 10. Availability of frameworks that promote cooperative action against online piracy 11. Scope of limitations and exceptions to copyrights and related rights 12. Digital rights management legislation 13. Clear implementation of policies requiring proprietary software used on government ICT systems to be licensed software Total Score—Copyrights Trademarks, Related Rights, and Limitations 14. Trademarks term of protection (renewal periods) 15. Nondiscrimination/nonrestrictions on the use of brands in packaging of different products 16. Ability of trademark owners to protect their trademarks: requisites for protection 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks 18. Availability of frameworks that promote action against online sale of counterfeit goods Total Score—Trademarks Trade Secrets and Market Access 19. Protection of trade secrets 20. Barriers to market access Total Score—Trade Secrets and Market Access Enforcement

Total Possible Score

Score 1 0.25 0 0 1 0.6 0.5 3.35

7

0.6339 0.25 0 0.25 0 0.5 1.63

6

1 1 0.5 0.5 0.25 3.25

5

0.25 0.25 0.5

2

39

Calculated as the average of the term for broadcasts (50 years) and all other copyrighted works (70 years) divided by the baseline term of 95 years.

80

21. Physical counterfeiting rates 22. Software piracy rates 23. Civil and procedural remedies 24. Preestablished damages and/or mechanisms for determining the amount of damages generated by infringement 25. Criminal standards including minimum imprisonment and minimum fines 26. Effective border measures Total Score—Enforcement Membership and Ratification of International Treaties 27. WIPO Internet Treaties 28. Singapore Treaty on the Law of Trademarks 29. Patent Law Treaty 30. At least one free trade agreement with substantive and/or specific IP provisions such as chapters on IP and separate provisions on IP rights provided it was signed after WTO/TRIPS membership Total Score—Treaties Total Overall Score

0.6640 0.4141 0.5 0.25 0.25 0.25 2.32

6

1 0 0 1 2 13.05

4 30

Strengths and Weaknesses Key Areas of Strength  Legislation provides for fair and transparent use of compulsory licensing  Legal measures provide necessary exclusive rights to copyright holders and voluntary notification system  Civil and procedural remedies in legislation

Key Areas of Weakness  Patentability of pharmaceutical inventions  Absence of an effective pharmaceutical-related patent enforcement and resolution mechanism  Gaps in regulation governing pharmaceutical and agrochemical data protection  Lack of sufficient framework to promote action against online piracy  Weak trade secret protection and ineffective application

Spotlight on the National IP Environment Past Editions versus Current Scores Chile’s overall score has dropped slightly, from 13.32 in the 3rd edition to 13.05 in the 4th edition, remaining at 44% of the total possible score. Though efforts at strengthening IP and fulfilling Chile’s FTA obligations picked up in 2015, there were no concrete movements on legislative measures. New draft bills that would seek to fill existing gaps in IP protection are reportedly under discussion and expected to be submitted to Congress; however, nothing had been released at the time of research. In a negative sense, the measures that have progressed include legislation on a plain 40

Calculated based on the Global Measure of Physical Counterfeiting, where Chile ranked 25 out of 38 economies mapped. 41 Based on software piracy rates (59%) compiled by the BSA.

81

packaging bill that was progressing through the Chilean Congress at the time of research. In addition, rates of piracy and counterfeiting continue to rise and represent major challenges in the economy, with streaming, box-set, and satellite piracy increasingly significant concerns for industry. The accession by Chile to the TPP and adoption of the IP standards enshrined within the agreement would strengthen Chile’s national IP environment. Patents, Related Rights, and Limitations Patent Areas of Note Chile is currently undertaking reforms to its Industrial Property Law. A new draft was under discussion in 2015, although it was not yet released publicly at the time of research. Similar to previous amendment drafts, the new draft law also reportedly contains provisions that would strengthen the enforcement of pharmaceutical patents, as well as the ability to obtain injunctions. Positively speaking, the amendments are also aimed at streamlining opposition procedures for patents and opportunities for appeals; negatively, they would place limits on additions to patent applications. These measures, if passed, would impact Chile’s score for a number of indicators. Copyrights, Related Rights, and Limitations 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking): Piracy remains a major challenge in Chile. According to estimates from the European Trade Commission, the content industry annually loses about 35% in revenues to piracy in Chile. Particularly problematic areas include illegal streaming and satellite signal piracy and retransmission, with open signals and new technologies for accessing them increasingly available in the region and little redress possible through the existing legal framework. The local journalism organization, AIPEF Chile, estimates that pirated content and services represent 7% of the paid-TV market, which, although seemingly low, leads to losses of about USD66 million annually and a drop in market growth of about 2% to 4% year on year. Circumvention devices are also widely available online and in brick-and-mortar marketplaces. Software piracy remains problematic, particularly due to a legislative vacuum in areas such as exceptions to software copyright protection, technological protection measures (TPMs), and ISP liability. 10. Availability of frameworks that promote action against online piracy: Chile’s notice and takedown procedure does not meet the requirements of its FTA with the United States. In particular, ISPs are only required to remove infringing content upon having “effective knowledge” (meaning that notice must be by a court, not simply from a rights holder). In light of the fact that the rate of prosecution is low, the ability of rights holders to benefit from the takedown system is quite limited. Law No. 20,435 introduced a voluntary system under which ISPs are to forward notices from rights holders to suspected infringers. The recording industry has recently reported improved cooperation with major ISPs in Chile in relation to the voluntary system; however, the fact remains that there are no consequences for ISPs that fail to act after acquiring the requisite knowledge of an infringement outside of a court order. Trademarks, Related Rights, and Limitations

82

15. Nondiscrimination/nonrestrictions on the use of brands in packaging: A bill that would introduce plain packaging for tobacco products was approved by the Chilean Senate, and the lower house of Congress may take up the measure in 2016. Specifically, the draft measure would require all such products to have generic packaging, with “all brands and logos having common characteristics” and not comprising more than 30% of the package.42 The bill would also require health warnings to cover 100% of the front and back of all packages. The introduction of such a measure applied to any industry would significantly restrict the use of brands, trademarks, and trade dress on retail packaging, undermining the benefits of trademarks to businesses and consumers alike, and setting a negative precedent for IP policy. Depending on the final form of the legislation, Chile’s score for this indicator could drop in future editions of the Index. Trade Secrets and Market Access 20. Barriers to market access: While under Chilean law it is mandatory for biopharmaceutical and agrochemical companies to submit undisclosed, proprietary test data in order to obtain market authorization for new chemical entities, the existing Industrial Property Law does not provide sufficient guarantee that this data will not be shared with third parties or relied on to approve other products. Enforcement 23. Civil and procedural remedies and 25. Criminal standards including minimum imprisonment and minimum fines: Existing Chilean law provides criminal penalties for IP rights infringement. However, criminal penalties are quite low, and are typically what is sanctioned by courts. Prosecution of IP infringement is hindered by gaps in the legal framework and lack of resources. 26. Effective border measures: Law No. 19,912 gives customs officials ex officio authority to detain goods entering Chile, but only for five days; after that, a formal seizure order is required to retain the goods; such a short period limits the ability of customs officials to effectively assess whether goods are infringing and for rights holders to respond to customs notices of seized products. Rights holders report a need for greater resources devoted to customs operations and a better-defined procedure for dealing with small packages containing infringing goods. Chile still requires a clear legal basis for detaining and seizing suspected transshipments. Membership and Ratification of International Treaties Chile scores 2 out of 4 in its participation and implementation of international treaties, mainly because of its FTA with the United States (signed and ratified in 2003). Chile has also signed and ratified the WIPO Internet Treaties (in 1996 and 2001, respectively). However, its implementation of aspects of both the FTA and WIPO Internet Treaties remains extremely deficient at this stage, reflected in its low scores for indicators on pharmaceutical patent enforcement and adjudication, cooperative mechanisms aimed at online piracy, and digital rights management (DRM). Chile is also one of the negotiating parties to the TPP. Negotiations concluded in October 2015. 42

See La Tercera (2015), “Ley Antitabaco: Senado Aprueba Aumentar a 100% la Advertencia en Cajetillas,” July 9, 2015; Packaging Business Review (2015), “Chile Proposes Plain Packaging for Cigarettes,” August 19, 2015.

83

China Scores Indicator Patents, Related Rights, and Limitations 1. Patent term of protection 2. Patentability requirements 3. Patentability of computer-implemented inventions 4. Pharmaceutical-related patent enforcement and resolution mechanism 5. Legislative criteria and use of compulsory licensing of patented products and technologies 6. Patent term restoration for pharmaceutical products 7. Regulatory data protection term Total Score—Patents Copyrights, Related Rights, and Limitations 8. Copyright (and related rights) term of protection 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) 10. Availability of frameworks that promote cooperative action against online piracy 11. Scope of limitations and exceptions to copyrights and related rights 12. Digital rights management legislation 13. Clear implementation of policies requiring proprietary software used on government ICT systems to be licensed software Total Score—Copyrights Trademarks, Related Rights, and Limitations 14. Trademarks term of protection (renewal periods) 15. Nondiscrimination/nonrestrictions on the use of brands in packaging of different products 16. Ability of trademark owners to protect their trademarks: requisites for protection 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks 18. Availability of frameworks that promote action against online sale of counterfeit goods Total Score—Trademarks Trade Secrets and Market Access 19. Protection of trade secrets 20. Barriers to market access Total Score—Trade Secrets and Market Access Enforcement

Total Possible Score

Score 1 0.5 1 0 1 0 0.6 4.1

7

0.5343 0.25 0.5 0.25 0.25 0.5 2.28

6

1 1 0.5 0.5 0.25 3.25

5

0.25 0 0.25

2

43

Calculated by dividing the term of protection for citizens’ works and all other types of copyrighted works (50 years) by the baseline term of 95 years.

84

21. Physical counterfeiting rates 22. Software piracy rates 23. Civil and procedural remedies 24. Preestablished damages and/or mechanisms for determining the amount of damages generated by infringement 25. Criminal standards including minimum imprisonment and minimum fines 26. Effective border measures Total Score—Enforcement Membership and Ratification of International Treaties 27. WIPO Internet Treaties 28. Singapore Treaty on the Law of Trademarks 29. Patent Law Treaty 30. At least one free trade agreement with substantive and/or specific IP provisions such as chapters on IP and separate provisions on IP rights provided it was signed after WTO/TRIPS membership Total Score—Treaties Total Overall Score

044 0.2645 0.5 0.25 0.25 0 1.26

6

1 0.5 0 0 1.5 12.64

4 30

Strengths and Weaknesses Key Areas of Strength  New trademark law introduces some improvements to registration and enforcement  Proposed patent and copyright law amendments (if adopted) extend protection and strengthen enforcement  Improved availability of damages and penalties for patent and copyright infringement  New dedicated IP Courts in Beijing/Shanghai/Guangzhou  Demonstrated ability to launch nationwide enforcement campaigns against counterfeiting and piracy activities in specific sectors

Key Areas of Weakness  Failure to stop growth of online counterfeiting  Continued tolerance of serious bad faith trademark problems  Uncertainty and hurdles regarding patenting and enforcement of biotech inventions  Actual trade secret theft remains high and legislation has not been updated  Policies requiring sharing of knowhow in exchange for market access continue to be enhanced  Inconsistent criminal prosecution against counterfeiters in many industry sectors  Nontransparent Anti-Monopoly Law (AML) investigations against foreign businesses

Spotlight on the National IP Environment Past Editions versus Current Scores 44

Calculated based on the Global Measure of Physical Counterfeiting, where China ranked 1 out of 38 economies mapped. 45 Based on software piracy rates (74%) compiled by the BSA.

85

China’s overall score has increased from 41% (with a score of 12.4) of the total possible score in the 3rd edition of the Index to 42% (with a score of 12.64) in the 4th edition. The improvement in score results from positive movement in the civil enforcement environment, including enhanced availability of damages as well as greater resources dedicated to adjudicating IP cases. Nevertheless, 2015 saw needed measures delayed (most notably, copyright amendments that would significantly improve the legal basis for protection of high-value content such as live sports broadcasts) and not yet taken (such as reform of trade secret protection). Still other areas have largely worsened in 2015, including market access barriers involving forced sharing or undervaluation of IP, particularly within the context of the AntiMonopoly Law and protection and enforcement against bad faith trademarks. Having said that, final revision and promulgation of legislation (particularly patent amendments) and administrative and judicial guidance issued in draft form in 2015 are likely to bring incremental improvements to the system in future editions of the Index. Patents, Related Rights, and Limitations 2. Patentability requirements: In 2015, two drafts of the fourth amendments to the Patent Law were released, the latest draft by the State Council in December 2015. The amendments contain a wide range of provisions that in some respects would bring China’s patent framework in line with international standards, while in others would represent steps backward. On the one hand, the provisions aim to improve compensation for, and deterrence against, patent infringement; promote commercialization of patents; streamline the patent grant and opposition system; and introduce a new pathway and protection for design patents. On the other hand, the amendments state that methods for the diagnosis and treatment of diseases are not patentable. In addition, the amendments include ambiguous language on defining how a patent should be exercised including, for instance, “in the public interest,” which leaves room for interpretations that go beyond the scope provided for in the TRIPS Agreement. Depending on the outcome of the final version of the patent amendments, China’s score for this indicator and related indicators in the Index may change. In addition, the past few years has seen a growing number of State Intellectual Property Office (SIPO) decisions that limit the introduction of experimental data to satisfy inventive step following the filing of the initial application, presenting particular difficulties for pharmaceutical and biotechnology firms seeking to defend patents in invalidation or reexamination proceedings. Despite a commitment by the Chinese government, beginning in the 2013 U.S.-China Joint Commission on Commerce and Trade (JCCT), to admit additional experimental data after the patent has been filed, there is no strong indication that China has implemented this commitment, both in terms of issuing patent office guidelines as well as in practice. This approach has led to a great deal of uncertainty as to the appropriate scope and number of patent claims and the level of data that must be generated and submitted for each. 4. Pharmaceutical-related patent enforcement and resolution mechanism: As noted in previous editions of the Index, the Drug Registration Regulations (DRR) do not represent an effective, timely, or transparent adjudication mechanism for patent linkage. The 2015 amendments to the Drug Administration Law (DAL), while positive in other ways, do not appear to directly address IP-related concerns. These concerns include a more concrete and expanded mechanism for patent enforcement 86

and dispute resolution, such as the ability to file an infringement suit before sales have taken place, a mechanism for patent holders to be notified of a generic application in a timely manner, and restrictions on market authorization of a follow-on product that allows sufficient time for dispute resolution. In addition, at the time of research, no movement was made on amendments to the DRR that would also address the above issues. A number of Judicial Interpretations issued in draft and final form in 2015 seek to improve the overall civil enforcement environment in such a way that may broadly improve biopharmaceutical patent enforcement, including improving evidence submission, clarifying timelines for preliminary injunctions, and increasing possible damages in patent infringement cases, depending on their final outcome and implementation. 7. Regulatory data protection term: Though formally China provides a six-year term of RDP for medicines, the scope of RDP remains both ambiguous and narrow. On the one hand, both the DAL and DRR lack a clear definition of a new chemical ingredient and what constitutes unfair commercial use of clinical data. At the same time, the Opinions Concerning the Reform of the Review and Approval System for Drugs and Medical Devices Issued by the State Council from 2015 confirm the definition of a new drug as being one with a first global launch in China, suggesting that RDP applies only to such products. China Food and Drug Administration’s (CFDA’s) draft Chemical Drug Registration Category Reform Plan (Category Plan) appears to recategorize innovative medicines into a generic drug category. The Category Plan creates a definition of “new drug” as “one that has never been approved in any country” rather than one that has never been approved in China. Under this proposed definition of “new drug,” a Chinese or foreign company with a drug that is approved abroad would appear to no longer be eligible for regulatory data protection. The introduction of such a definition and the limitation of the existing exclusivity period to only such “new drugs” would severely limit the availability of RDP in China and undermine the incentives for innovation and investment such exclusivity provides. This would also result in a reduction of the score for this indicator. Moreover, Technical Guidelines for the Research, Development and Evaluation of Biosimilars issued by CFDA in 2015 do not explicitly extend RDP to biologics and provide only for a “monitoring period” or regulatory marketing exclusivity (up to a maximum of five years) to locally manufactured biologics. Copyrights, Related Rights, and Limitations Copyright area of note: No major movement on proposed copyright amendments discussed in last year’s Index took place in 2015. Based on the latest publicly available draft, these amendments would introduce, among other elements, greater protection to all audiovisual works, joint liability of ISPs in online copyright infringement, and limitations on copying exceptions available for state agencies, libraries, and news agencies as well as on the scope of the work that may be copied. They would also reinforce elements of the Berne three-step test by requiring that use within an exception should not interfere with normal use of the work or rights holders’ legitimate rights.

87

9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) and 10. Availability of frameworks that promote action against online piracy: In 2015, the National Copyright Administration (NCAC) took concrete steps to enforce copyrights against online infringement through Operation Sword Net, including a deadline for online music service providers to remove infringing songs that resulted in over two million files being deleted from major music outlets in China. Also in 2015, NCAC issued draft Measures for the Implementation of Copyright Administrative Penalties, which includes an extension of the same administrative penalties applied to copyright infringers to ISPs that are aware or have been informed of infringing activity or users and do not address removal of them. An important district court in Beijing endorsed the ability to copyright live sports broadcasts, raising the hope of stronger protection in this area. While these steps are very positive, much more is needed in terms of actually approving the proposed copyright amendments and measures, facilitating a more effective notice and takedown mechanism, and widening provisions of legitimate content. Trademarks, Related Rights, and Limitations 16. Ability of trademark owners to protect their trademarks: requisites for protection; and 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks: As noted in previous editions of the Index, China has a strict well-known mark regime and, as such, requires broad geographical coverage in China and an exceptionally high reputation to exist protection can be obtained. While trademark amendments enacted in 2014 have enlarged the basis for filing opposition proceedings, particularly against bad faith applicants, protection for unregistered well-known marks is still limited if there is no clear previous relationship between the bad faith filer and the well-known mark holder. Some brand owners are still facing significant challenges in invalidating bad faith trademarks and also being subject to lawsuits filed by bad faith trademark owners. Furthermore, despite a handful of court decisions that ruled in favor of wellknown marks, these decisions are not necessarily applied by the Trademark Review and Adjudication Board (TRAB), with instances of TRAB ignoring judicial decisions in favor of well-known marks when approving bad faith marks. 18. Availability of frameworks that promote action against online sale of counterfeit goods: Important gaps in the framework governing ISP liability vis-à-vis online marketplaces remain, for instance in the Regulations on Protection for the Right of Network Dissemination of Information and Interim Administrative Measures on Online Commodity Trading and Services. In practice, ISPs including search engines and social networks are not frequently held accountable in court decisions; local data indicate a more than 90% acquittal rate in infringement suits against thirdparty platforms. Evidence suggests not enough is being done, with a heavy presence of counterfeit goods and inadequate action against known counterfeit sites and sellers continuing to be reported on some of China’s largest e-commerce sites.

88

Trade Secrets and Market Access 19. Protection of trade secrets: Although the protection of trade secrets in China remains quite challenging, some positive developments have taken place over the past year. New reports indicate draft amendments to the Anti-Unfair Competition Law support improved trade secret protection and enforcement at the administrative level. And at the November 2015 U.S.-China Joint Commission on Commerce and Trade, China declared its intention to clarify rules on preliminary injunctions, evidence preservation orders, and damages. Nevertheless, damages for trade secret violations remain relatively low. 20. Barriers to market access: Since the mid-2000s, China has introduced and implemented a range of policies that make access to the Chinese market conditional on the sharing of technology and IP with domestic entities. These policies include the transfer of proprietary technologies in procurement, joint ventures, and standardization processes; local manufacturing limits and requirements; and restrictions on investment by foreign entities, without guarantee they will be protected from unauthorized disclosure, duplication, distribution, and use. The State Administration for Industry and Commerce (SAIC) has issued new rules governing the abuse of IP under the AML that widen the basis for forced sharing of IP for multinational companies operating in China. These include requirements for the licensing of “essential” IP that could allow for broad interpretation and appropriation of IP rights, including for assets owned by rights holders not voluntarily participating in a standard-setting organization. The rules also place limitations on the exercise of IP rights by so-called “dominant” firms, with the standards for dominance considered to be relatively low. In addition, the three antimonopoly enforcement agencies are preparing Anti-Monopoly Guidelines on the Abuse of Intellectual Property Rights, and there are similar concerns regarding refusal to license, excessive pricing, and licensing fees provisions. In 2015, AML was applied in the IP area, for instance in a case in which Qualcomm was ordered to pay $975 million for vaguely defined AML violations and to license its patents at a regulated rate. A number of other companies were also under investigation at the time of research. There are concerns regarding the proposed fourth amendment to the Patent Law, which introduces a broadly defined license system for standard essential patents that would allow automatic licensing of patents for the sake of implementing a standard even if the patent holder has not explicitly agreed to it. In addition, proposed guidance from tax authorities would require a higher amount of global value chain profits from multinational companies to be conducted and “booked” in China as well as greater tax presence overall (such as the opening of local subsidiaries) in order to market their products in China. The new rules would reportedly involve transfer and “enhancement” of IP, among other assets. Enforcement 23. Civil and procedural remedies: Though rights holders consider available civil remedies in China to be limited and nondeterrent, and the remedy process cumbersome, 2015 brought some improvements to the enforcement environment including greater resources, stronger penalties, promotion of injunctive relief, and wider ability to use evidence. In 2015, the Supreme People’s Court (SPC) issued Provisional Regulations on Several Issues concerning the Participation of Technical Investigators in Intellectual Property Court Proceedings, which allow for greater technical expertise and support in IP-related judicial proceedings. In a similar vein, on 89

top of the new court in Beijing, 2 additional IP courts are now in operation—in Shanghai and Guangzhou, with about 3,000 judges now committed exclusively to IP cases (the large majority being cases of first instance) nationwide. Although preliminary injunctions remain rare, particularly for patents, there are instances in which the new IP courts have issued them in a timely manner (for example, in the 2015 Guangzhou IP court ruling in Blizzard Entertainment and Netease v. Chengdu Qiyou Ltd., Beijing Fenbo Times Internet Technology Co., Ltd., and Guangzhou Dongjing Computer Technology Co., Ltd.). In relation to preliminary injunctions, the SPC also issued a draft Judicial Interpretation in 2015 that seeks to harmonize rules governing preliminary injunctions in IP and antitrust cases. The Judicial Interpretation is a welcome clarification, although it remains to be seen whether the final version will address key outstanding issues, including a concrete and predictable timeline for issuing and terminating preliminary injunctions and allowances for evidence preservation. Also in 2015, the SPC promulgated a Judicial Interpretation of the Civil Procedure Law. Among other elements, this Judicial Interpretation provides greater clarity on evidence submission and allows for inclusion of electronic data in evidence. In terms of rights-specific improvements, the draft fourth amendments to the Patent Law would increase damages for willful infringement up to 2 to 3 times the actual loss and increases the penalty maximum to 5 times the revenue generated while marketing the infringing product. In relation to copyright, the NCAC draft Measures for the Implementation of Copyright Administrative Penalties lower the threshold for what is considered a “serious circumstance” (and thus justify higher penalties) and provide for seizure of computers and servers related to infringing activities. 24. Preestablished damages and/or mechanisms for determining the amount of damages generated by infringement: In 2015, judicial and administrative initiatives partially strengthened the availability of, and scope for, damages for IP infringement. In relation to patents, the SPC Decision on Revising Several Provisions of the Supreme People’s Court on Issues Concerning the Application of Law in the Adjudication of Patent Dispute Cases provides for the possibility of relatively heighted damages in patent cases, of between RMB10,000 and RMB1,000,000 (up to about USD150,000). This is a moderate increase; however, the latest draft amendment to the Patent Law raises the damages cap to RMB5,000,000 (up to about USD794,000). If enacted, this would be a positive step. Also, the CFDA Circular on Issues Relating to Comprehensive Implementation of Electronic Supervision and Administration for Drug Production and Distribution Enterprises introduces an electronic monitoring and data collection system for pharmaceutical products, including allowing data to be made publicly available and admissible in court based on court order, and potentially enlarging the evidence available on which to determine damages for infringement of pharmaceutical patents. In terms of trade secrets, securing even a fraction of the damages claimed continues to represent a challenge, due to limits on proving the link between misappropriation and actual losses.

90

Colombia Scores Indicator Patents, Related Rights, and Limitations 1. Patent term of protection 2. Patentability requirements 3. Patentability of computer-implemented inventions 4. Pharmaceutical-related patent enforcement and resolution mechanism 5. Legislative criteria and use of compulsory licensing of patented products and technologies 6. Patent term restoration for pharmaceutical products 7. Regulatory data protection term Total Score—Patents Copyrights, Related Rights, and Limitations 8. Copyright (and related rights) term of protection 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) 10. Availability of frameworks that promote cooperative action against online piracy 11. Scope of limitations and exceptions to copyrights and related rights 12. Digital rights management legislation 13. Clear implementation of policies requiring proprietary software used on government ICT systems to be licensed software Total Score—Copyrights Trademarks, Related Rights, and Limitations 14. Trademarks term of protection (renewal periods) 15. Nondiscrimination/nonrestrictions on the use of brands in packaging of different products 16. Ability of trademark owners to protect their trademarks: requisites for protection 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks 18. Availability of frameworks that promote action against online sale of counterfeit goods Total Score—Trademarks Trade Secrets and Market Access 19. Protection of trade secrets 20. Barriers to market access Total Score—Trade Secrets and Market Access Enforcement 21. Physical counterfeiting rates

Score

Total Possible Score

1 0.5 0 0.25 1 0 0.5 3.25

7

0.8446 0.25 0 0.25 0 0.5 1.84

6

1 1 0.5 0.5 0.25 3.25

5

0.5 0.25 0.75

2

0.4547

46

Calculated as the minimum term (80 years), divided by the baseline term of 95 years. Calculated based on the Global Measure of Physical Counterfeiting, where Colombia ranked 17 out of 38 economies mapped. 47

91

22. Software piracy rates 23. Civil and procedural remedies 24. Preestablished damages and/or mechanisms for determining the amount of damages generated by infringement 25. Criminal standards including minimum imprisonment and minimum fines 26. Effective border measures Total Score—Enforcement Membership and Ratification of International Treaties 27. WIPO Internet Treaties 28. Singapore Treaty on the Law of Trademarks 29. Patent Law Treaty 30. At least one free trade agreement with substantive and/or specific IP provisions such as chapters on IP and separate provisions on IP rights provided it was signed after WTO/TRIPS membership Total Score—Treaties Total Overall Score

0.4848 0.25 0.5 0.5 0.5 2.68

6

1 0 0 1 2 13.77

4 30

Strengths and Weaknesses Key Areas of Strength  Basic patentability framework  Policy present that promotes legal software use in government  Civil remedies and criminal standards framework in place  Basic legal framework for trademark protection  Statutory damages in place for trademark infringement  Border measures relating to ex officio authority and in-transit detainment by customs officials

48

Key Areas of Weakness  Key pharmaceutical IP rights missing or with significant holes in application  Uncertainty in RDP scope for biologics and actual implementation across the board  Failure to implement free trade agreement provisions relating to notice and takedown, DRM, or statutory damages for copyright infringement  Lack of clarity on copyright exceptions in legislation and application  Prosecution in online copyright environment weak  Gaps in legal protection for unregistered marks  Delay in redress of trademark infringement  High digital and physical piracy rates  Delayed, inadequate prosecution and nondeterrent sentencing  Mixed application of border measures

Based on software piracy rates (52%) compiled by the BSA.

92

Spotlight on the National IP Environment Past Editions versus Current Scores Colombia’s score remains essentially the same as in the 3rd edition of the Index at 46% of the overall score, though its score rose slightly from 13.67 in the 3rd edition to 13.77 in the 4th edition. Almost across the board, little movement on closing remaining gaps in IP protection took place. Legislative efforts in relation to implementing Colombia’s commitments under the U.S.-Colombia Trade Promotion Agreement (TPA) and WIPO Internet Treaties continued to stall (despite several obligations becoming overdue during 2015), particularly in terms of copyright legislation as well as improvements to civil and criminal enforcement of IP rights. Among a small handful of positive steps was the introduction of statutory damages for trademark infringement, which improves compensation available in cases of repeat and deliberate infringement. In addition, the patent office continued to streamline its efforts gradually (bringing average time to grant patents down to 2 years). Also, 2015 saw greater education as well as enforcement activity among administrative, police, and judicial branches. Patents, Related Rights, and Limitations 3. Patentability of computer-implemented inventions: While patent office guidelines (Guía para examen de Solicitudes de Patente de Invención y modelo de Utilidad) do provide criteria for software patent approval, based on having a technical application directed toward a hardware or process operated by a computer, legal analysis indicates that as of 2015, in the large majority of cases, the patent office denies software patents. 7. Regulatory data protection term: Decree 2085 of 2002 provides for a five-year period of regulatory data protection for both pharmaceuticals and agrochemicals. However, some uncertainty exists as to the application of regulatory data protection to biologics. Decree 1782, signed in September 2014, which modifies the registration process for biological medicines, does not discuss regulatory data protection for biologics. As a result, in regard to RDP the legislation introduces ambiguity as to whether five years of protection are in fact afforded to biologics under the new regime. Copyrights, Related Rights, and Limitations Copyright Area of Note: The year 2015 did not see any movement on copyright amendments that would fulfill Colombia’s obligations in its TPA with the United States, including a proposed Law 306 that introduces protection against anticircumvention of TPMs. Colombia is now overdue in meeting its copyright-related commitments under the TPA. 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking): Piracy of audiovisual content continues to present a major problem in Colombia. Local industry studies estimate that about 50% of cable TV services are accessed illegally or in an unauthorized manner in Colombia, leading to economic losses of about USD100 million per year. Despite increasing use of paid-for and authorized subscription services (estimated today to be at least a USD2 billion 93

industry), a heavy presence of illicit retransmission instruments and technologies— reflected in a growing number of seizures by government authorities—still undermines these efforts. Enforcement 21. Physical counterfeiting rates and 22. Online piracy rates: While Colombia has taken steps to better protect IP rights by increasing penalties for trademark violations, counterfeit goods distribution at borders and through shopping areas like San Andresitos remains a major and growing concern. Additionally, online piracy, and software piracy particularly, remain high (though still one of the lowest software piracy rates in Latin America). 24. Preestablished damages and/or mechanisms for determining the amount of damages generated by infringement: In a positive move, Decree 2264 (implementing Law 1648 from 2013) introduces statutory damages for trademark infringement. These damages are set at 3 to 100 times the monthly minimum salary (which in 2015 was about 644,000 Colombian pesos or about USD200) and 200 times this figure for notorious, bad faith, or repeat infringers as well as cases that involve life-threatening infringement. In practice, the Ministry of Industry and Trade requires that rights holders still demonstrate that damages have been sustained (an approach aimed at protecting against bad faith use of the system). Statutory damages for copyright infringement are still missing from the legal framework, in violation of Colombia’s commitments under its TPA with the United States. Membership and Ratification of International Treaties Colombia has signed and ratified the WIPO Internet Treaties, but it still fails to participate in and ratify the Patent Law Treaty and the Singapore Treaty on the Law of Trademarks. Colombia has concluded the U.S.-Colombia TPA, which was enacted in May 2012 and includes substantial provisions on IP rights (Chapter 16 of the agreement).

94

Ecuador Scores Indicator Patents, Related Rights, and Limitations 1. Patent term of protection 2. Patentability requirements 3. Patentability of computer-implemented inventions 4. Pharmaceutical-related patent enforcement and resolution mechanism 5. Legislative criteria and use of compulsory licensing of patented products and technologies 6. Patent term restoration for pharmaceutical products 7. Regulatory data protection term Total Score—Patents Copyrights, Related Rights, and Limitations 8. Copyright (and related rights) term of protection 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) 10. Availability of frameworks that promote cooperative action against online piracy 11. Scope of limitations and exceptions to copyrights and related rights 12. Digital rights management legislation 13. Clear implementation of policies requiring proprietary software used on government ICT systems to be licensed software Total Score—Copyrights Trademarks, Related Rights, and Limitations 14. Trademarks term of protection (renewal periods) 15. Nondiscrimination/nonrestrictions on the use of brands in packaging of different products 16. Ability of trademark owners to protect their trademarks: requisites for protection 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks 18. Availability of frameworks that promote action against online sale of counterfeit goods Total Score—Trademarks Trade Secrets and Market Access 19. Protection of trade secrets 20. Barriers to market access Total Score—Trade Secrets and Market Access Enforcement

49

Score

Total Possible Score

1 0.5 0 0 0 0 0 1.5

7

0.7349 0.25 0 0.25 0.25 0 1.48

6

1 1 0.25 0.25 0.25 2.75

5

0.25 0 0.25

2

Calculated as the minimum term (70 years), divided by the baseline term of 95 years.

95

21. Physical counterfeiting rates 22. Software piracy rates 23. Civil and procedural remedies 24. Preestablished damages and/or mechanisms for determining the amount of damages generated by infringement 25. Criminal standards including minimum imprisonment and minimum fines 26. Effective border measures Total Score—Enforcement Membership and Ratification of International Treaties 27. WIPO Internet Treaties 28. Singapore Treaty on the Law of Trademarks 29. Patent Law Treaty 30. At least one free trade agreement with substantive and/or specific IP provisions such as chapters on IP and separate provisions on IP rights provided it was signed after WTO/TRIPS membership Total Score—Treaties Total Overall Score

0.3250 0.3251 0.25 0.25 0 0.5 1.64

6

1 0 0 0 1 8.62

4 30

Strengths and Weaknesses Key Areas of Strength  Rudimentary IP system in place  Legal framework in place for ex officio action to be taken by customs against infringing goods both intended for the domestic market and in transit  Signed and acceded to WIPO Internet Treaties

Key Areas of Weakness  History of issuing of CLs and stated public use of CLs as a tool for technical economic development  Limited framework for protection of life science IP  Decriminalization of copyright infringement completely outside international standards and treaty obligations  High levels of piracy  Limited participation in international IP treaties

Spotlight on the National IP Environment Patents, Related Rights, and Limitations 2. Patentability requirements: Ecuador’s Intellectual Property Law provides for the protection of patents if they meet the requirements of novelty, inventiveness, and susceptibility to industrial application. Ecuador does not consider treatment methods as patentable subject matter, and the Andean Court of Justice has barred the recognition of second medical use patents within Andean Community member economies. In addition to these technical barriers to patenting, Ecuador also has in place a number of administrative barriers, chief among these high patent fees. Changes to filing fees in 2012–13 have significantly raised the administrative costs 50

Calculated based on the Global Measure of Physical Counterfeiting, where Ecuador ranked 12 out of 38 economies mapped. 51 Based on software piracy rates (68%) compiled by the BSA.

96

for patent, trademark, and industrial design applications. In particular, the fees for filing a patent application, examination, and annuity payments have risen substantially, in some cases by over 3,000%. With this fee structure, Ecuador now has some of the highest administrative fees in the world. At the time of research, the latest published fee charts maintained these increased fees. 5. Legislative criteria and active use of compulsory licensing of patented products and technologies: Since 2010, Ecuador has been an active user of compulsory licensing for biopharmaceutical products. Nine licenses have been granted since 2010 and 12 more are being considered. These licenses have been issued on the basis of being a cost containment mechanism and the policy of encouraging domestic innovation. Indeed, the patent coordinator for Ecuador’s Intellectual Property Institute (IEPI) currently states on the institute’s website that the underlying purpose of issuing compulsory licenses was to deliberately cut the cost of medicines. It is further stated that an additional goal of the government’s compulsory licensing regime is to strengthen domestic pharmaceutical manufacturing and R&D capacity, ultimately replacing existing imports. 7. Regulatory data protection: Ecuador does not provide for an effective term of regulatory data protection. Article 191 of the Intellectual Property Law provides a basis for the protection of submitted biopharmaceutical test data. However, no term of protection is specified in this legislation and rights holders report that de facto protection of their data is limited as regulators have relied on this data for the approval of follow-on products. In 2014, Ecuador acceded to the EU’s FTA with the Andean Community and is due to sign and ratify this agreement. This treaty includes a minimum term of five years of regulatory data protection due to be implemented by the early 2020s. Copyrights, Related Rights, and Limitations 13. Clear implementation of policies and guidelines requiring that any proprietary software used on government ICT systems should be licensed software: Ecuador has a high rate of software piracy—68% of total software as estimated by the BSA in its latest survey. Since the late 2000s and Presidential Decree 1014, the government of Ecuador has had a policy of mandating government use of open-source software. Neither the presidential decree nor the subsequent government strategy document (Estrategia Para La Implantación de Software Libre) specified the need for the use of only licensed software (regardless of whether it is proprietary) and no evidence is available of guidelines containing such language or their active implementation and application. Only an indirect requirement for the use of licensed software is made in the 2014 National E-Government Plan (Plan Nacional de Gobierno Electrónico). Enforcement 23. Civil and procedural remedies; 24. Preestablished damages and/or mechanisms for determining the amount of damages generated by infringement; and 25. Criminal standards, including minimum imprisonment and minimum fines: The IP enforcement environment in Ecuador is difficult. Counterfeit goods remain widespread; for example, the La Bahia outdoor market in Guayaquil (Ecuador’s largest city) is listed in the USTR’s Review of Notorious Markets. 97

Furthermore, a number of negative legislative and administrative developments have taken place in recent years. The 2013 amendments to the Intellectual Property Law removed criminal penalties and sanctions for copyright infringement. As a result, Ecuador’s IP enforcement environment stands firmly outside international standards. While mechanisms for civil and administrative enforcement remain available, rights holders face significant challenges accessing them. The judicial process is drawn out; legal redress is difficult to obtain and, by international standards, unpredictable. Both the World Bank’s Doing Business report and the World Justice Project’s Rule of Law Index note the long delays in accessing civil and commercial justice as being particularly pronounced. Ecuador does not have in place a system of preestablished or statutory damages for IP infringement. Administrative remedies are available through the IEPI. However, since the 2012 Executive Decree 1322 and subsequent reorganization of the IEPI, rights holders report that such administrative recourse mechanisms remain de facto unavailable, with IEPI’s enforcement activity significantly reduced. Membership and Ratification of International Treaties Ecuador scores low in its participation in and ratification of international treaties because it is not a contracting party to the Patent Law Treaty or the Singapore Treaty on the Law of Trademarks. Ecuador is a signatory of and has acceded to the WIPO Internet Treaties. Furthermore, Ecuador has announced that it intends to accede to the FTAs between the EU and the Andean Community. Negotiations between Ecuador and the EU concluded in 2014, and the two parties are now preparing the treaty for signature and ratification.

98

France Scores Indicator Patents, Related Rights, and Limitations 1. Patent term of protection 2. Patentability requirements 3. Patentability of computer-implemented inventions 4. Pharmaceutical-related patent enforcement and resolution mechanism 5. Legislative criteria and use of compulsory licensing of patented products and technologies 6. Patent term restoration for pharmaceutical products 7. Regulatory data protection term Total Score—Patents Copyrights, Related Rights, and Limitations 8. Copyright (and related rights) term of protection 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) 10. Availability of frameworks that promote cooperative action against online piracy 11. Scope of limitations and exceptions to copyrights and related rights 12. Digital rights management legislation 13. Clear implementation of policies requiring proprietary software used on government ICT systems to be licensed software Total Score—Copyrights Trademarks, Related Rights, and Limitations 14. Trademarks term of protection (renewal periods) 15. Nondiscrimination/nonrestrictions on the use of brands in packaging of different products 16. Ability of trademark owners to protect their trademarks: requisites for protection 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks 18. Availability of frameworks that promote action against online sale of counterfeit goods Total Score—Trademarks Trade Secrets and Market Access 19. Protection of trade secrets 20. Barriers to market access Total Score—Trade Secrets and Market Access Enforcement 21. Physical counterfeiting rates

Score

Total Possible Score

1 1 1 0.5 1 1 1 6.5

7

0.7452 0.75 0.75 1 1 0.75 4.99

6

1 1 1 1 0.5 4.5

5

0.75 1 1.75

2

0.8453

52

Calculated as the minimum term (70 years), divided by the baseline term of 95 years. Calculated based on the Global Measure of Physical Counterfeiting, where France ranked 32 out of 38 economies mapped. 53

99

22. Software piracy rates 23. Civil and procedural remedies 24. Preestablished damages and/or mechanisms for determining the amount of damages generated by infringement 25. Criminal standards including minimum imprisonment and minimum fines 26. Effective border measures Total Score—Enforcement Membership and Ratification of International Treaties 27. WIPO Internet Treaties 28. Singapore Treaty on the Law of Trademarks 29. Patent Law Treaty 30. At least one free trade agreement with substantive and/or specific IP provisions such as chapters on IP and separate provisions on IP rights provided it was signed after WTO/TRIPS membership Total Score—Treaties Total Overall Score

0.6454 1 1 1 1 5.48

6

1 1 1 1 4 27.22

4 30

Strengths and Weaknesses Key Areas of Strength  New plan to combat online piracy launched by Ministry of Culture and Communication in 2015  Strong and sophisticated national IP environment  Sector-specific IP rights such as regulatory data protection and patent term restoration in place  Effective trademark protection  Strong civil remedies and criminal penalties in place  Commitment to and implementation of international treaties

Key Areas of Weakness  Despite a slight drop in a recent BSA survey, high levels of software piracy persist in comparison to other highincome OECD economies  The French Parliament passed a bill introducing plain package legislation late in December 2015; at the time of research, the new legislation was set to receive final assent and be implemented in the first half of 2016

Spotlight on the National IP Environment Past Editions versus Current Scores France’s overall score remains roughly the same as in the previous edition of the Index, at 91% of the total possible score (with a score of 27.22). France has a sophisticated and well-developed national IP environment with most major IP rights available and adequately enforced. Still, areas of concern remain. The French Parliament passed plain package legislation late in December 2015. At the time of research, the new legislation was set to receive assent and be implemented in the first half of 2016. If this legislation is implemented, it would negatively affect France’s score in the Trademarks category. Similarly, online piracy remains a challenge in France, with the future role of the Haute Autorité pour la Diffusion des Oeuvres et la 54

Based on software piracy rates (36%) compiled by the BSA.

100

Protection des Droits sur Internet (HADOPI) agency unclear as suggested by a July 2015 report authored by French senators Loïc Hervé and Corinne Bouchoux. Copyrights, Related Rights, and Limitations 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking): As noted in previous editions of the Index, the French government has since the late 2000s introduced a number of policies aimed at reducing online copyright infringement. Most significantly, the graduated response scheme put in place in 2009 through HADOPI—despite evidence that its early tougher measures had a positive impact on music sales—has been significantly reduced with regard to both the agency’s legal mandate and staffing. The problem of illegal downloading still persists. A 2015 report in Le Figaro suggests online piracy is pervasive in France, with an estimated 10 million French users accessing illegal content through some of the biggest pirate sites online. Over the past year, the French government has made several announcements targeting online piracy and has also supported and acted as an intermediary in a number of private voluntary initiatives. In March 2015, the Ministry of Culture and Communication released a three-point strategy aiming to streamline the reporting, monitoring, and enforcement against pirated material. The strategy included a strong emphasis on limiting the financial benefits of hosting illegal content, specifically to reduce advertising revenue going to websites hosting or providing access to infringing material. The announcement of the strategy was followed by the signing of a charter of best practice including a commitment to respect copyright and creativity by the major advertising agencies and houses in France. In October 2015, the Minister of Culture, Fleur Pellerin, announced an additional agreement brokered by the government between artists, record labels, and online service providers promoting a digital online music market. As part of the agreement, the government has committed to improving the protection of copyright domestically and internationally, particularly through the pending creation of the EU’s single market in digital services. Trademarks, Related Rights, and Limitations Trademark Areas of Note: A new EU Trademarks Directive was passed and published in 2015. The reform process has been ongoing since 2010/11 when the Commission first called for a deepening of the existing regulatory and legislative framework. Most of the new directive will come into force in the first quarter of 2016, with individual member states having three years to fully implement the provisions. Although the system in place at the EU level and within individual member states is already relatively sophisticated and provides strong protection for EU rights holders, Directive 2015/2436 introduces a number of important reforms. It harmonizes existing rules and regulations, streamlining, for example, opposition and cancellation actions as well as the classification of eligible goods and services. 15. Nondiscrimination/nonrestrictions on the use of brands in packaging of different products: As noted in the previous edition of the Index, the French government has committed to introduce plain packaging legislation for tobacco products. In July 2015, the French Senate removed the relevant plain packaging clause from proposed government legislation. Having initially stated that it would seek to reintroduce the legislation in early 2016, French Parliament passed plain 101

package legislation late in December 2015. At the time of research, the new legislation was set to receive assent and be implemented in the first half of 2016. The introduction of such a measure applied to any industry would significantly restrict the use of brands, trademarks, and trade dress on retail packaging, undermining the benefits of trademarks to businesses and consumers alike, and setting a negative precedent for intellectual property policy. The passage of such legislation would decrease France’s score in this indicator from 1 to 0. Membership and Ratification of International Treaties France has signed and acceded to all of the international treaties included in the Index. Furthermore, the EU has concluded and ratified several FTAs with substantive IP provisions, such as the EU-Korea Trade Agreement of 2010. The EU has agreed in principle on a major trade agreement with Canada and is in negotiations with the United States on a trade agreement.

102

Germany Scores Indicator Patents, Related Rights, and Limitations 1. Patent term of protection 2. Patentability requirements 3. Patentability of computer-implemented inventions 4. Pharmaceutical-related patent enforcement and resolution mechanism 5. Legislative criteria and use of compulsory licensing of patented products and technologies 6. Patent term restoration for pharmaceutical products 7. Regulatory data protection term Total Score—Patents Copyrights, Related Rights, and Limitations 8. Copyright (and related rights) term of protection 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) 10. Availability of frameworks that promote cooperative action against online piracy 11. Scope of limitations and exceptions to copyrights and related rights 12. Digital rights management legislation 13. Clear implementation of policies requiring proprietary software used on government ICT systems to be licensed software Total Score—Copyrights Trademarks, Related Rights, and Limitations 14. Trademarks term of protection (renewal periods) 15. Nondiscrimination/nonrestrictions on the use of brands in packaging of different products 16. Ability of trademark owners to protect their trademarks: requisites for protection 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks 18. Availability of frameworks that promote action against online sale of counterfeit goods Total Score—Trademarks Trade Secrets and Market Access 19. Protection of trade secrets 20. Barriers to market access Total Score—Trade Secrets and Market Access Enforcement

Score

Total Possible Score

1 1 1 0.5 1 1 1 6.5

7

0.6355 1 1 0.75 1 1 5.38

6

1 1 1 1 0.5 4.5

5

1 1 2

2

55

Calculated as the average of the term for joint authors, cinematographic works, and musical compositions (70 years); and photographic works (50 years), divided by the baseline term of 95 years.

103

21. Physical counterfeiting rates 22. Software piracy rates 23. Civil and procedural remedies 24. Preestablished damages and/or mechanisms for determining the amount of damages generated by infringement 25. Criminal standards including minimum imprisonment and minimum fines 26. Effective border measures Total Score—Enforcement Membership and Ratification of International Treaties 27. WIPO Internet Treaties 28. Singapore Treaty on the Law of Trademarks 29. Patent Law Treaty 30. At least one free trade agreement with substantive and/or specific IP provisions such as chapters on IP and separate provisions on IP rights provided it was signed after WTO/TRIPS membership Total Score—Treaties Total Overall Score

0.9756 0.7657 1 0.75 1 1 5.48

6

1 1 0.5 1 3.5 27.36

4 30

Strengths and Weaknesses Key Areas of Strength  Advanced and sophisticated national IP environment  Sector-specific IP rights such as regulatory data protection and patent term restoration in place  Broad online copyright protection  Legal measures in place to address unauthorized use of trademarks

Key Areas of Weakness  Damages awards historically not very high  Patent Law Treaty signed but not ratified

Spotlight on the National IP Environment Past Editions versus Current Scores Germany’s overall score remains roughly the same as in the previous edition of the Index, at 91% of the total possible score (with a score of 27.36). Germany has a sophisticated and well-developed national IP environment with most major IP rights available and adequately enforced. While no specific draft laws have been announced, the stated desire by the Ministry for Culture and Media to reform the existing copyright framework and ensure modern, effective protection for rights holders online should further strengthen Germany’s copyright environment and continue to encourage German creativity and innovation.

56

Calculated based on the Global Measure of Physical Counterfeiting, where Germany ranked 32 out of 38 economies mapped. 57 Based on software piracy rates (24%) compiled by the BSA.

104

Patents, Related Rights, and Limitations and Enforcement 4. Pharmaceutical-related patent enforcement and resolution mechanism and 21. Civil and procedural remedies: As noted in previous editions of the Index, the European Medicines Agency does not consider the patent status of an applicant for marketing approval for a generic drug, and there is no explicit regulatory framework in place. The EU’s system of patent enforcement through member state courts (including Germany) is generally considered by major stakeholders as providing an effective and transparent resolution process. As noted in previous editions of the Index, Germany has 4 courts that specialize in patent infringement: Dusseldorf, Mannheim, Hamburg, and Munich. These courts are all highly regarded and handle an estimated 1,000 cases per year. Preliminary injunctions can be granted in Germany within a few days or weeks, and a decision on the merits can be made within 6 to 12 months. Legal analysis suggests that recent case law has opened up questions of interpretation and varying levels of protection for pharmaceutical patents with regard to second use claims. Specifically, courts in Germany are offering different interpretations as to the potential for direct infringement and the extent to which “skinny labeling” (that is, a label on a generic follow-on product that does not refer to the new or second use treatment of the original reference product) limits infringement responsibility for generic manufacturers. Traditionally, the interpretation of infringement has been relatively narrow. Relevant case law held that even those instances in which advertising materials for a follow-on product referred to the second, protected use of the drug, did not constitute direct infringement. In 2015, German jurisprudence may have taken a different direction with decisions taken by District Court Hamburg suggesting that, in certain cases, skinny labeling did not constitute a strong enough defense and, in fact, could amount to indirect infringement. The cases centered on not only skinny labeling but also the interaction of public drug substitution policies through pharmaceutical reimbursement and prescription services. In Germany (as in many other European economies), pharmacists are, unless otherwise instructed, obliged to substitute a prescribed medication with a cheaper generic equivalent if one is available. During these proceedings, the German Cartel Office (Bundeskartellamt) issued a decision affirming that patent protection and the interests of the rights holder were at risk through the interaction of drug substitution policies, second use patent protection, and the design of public tenders. The Office ordered the reissuing and organization of the tender. Copyrights, Related Rights, and Limitations 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking); 11. Scope of limitations and exceptions to copyrights and related rights; and 12. Digital rights management legislation: While no legislative changes had been put forward by the German federal government at the time of research, a number of important policy announcements on the protection of copyright were made during 2015. In March, the Federal Minister for Culture and Media presented a position paper on reforming copyright in the digital age. Although the plan and subsequent statements have not included any draft legislation, the position paper reaffirmed Germany’s commitment to the protection of copyright and need to strengthen existing measures with regard to online infringement. In particular, the minister called for increased action on eliminating sources of income (chiefly through 105

advertising) for websites hosting infringing and pirated content. Furthermore, in a joint statement, the French and German governments made clear that the development of the European digital single market should take place with the protection of copyright and fair remuneration of rights holders at the center. The creation of the digital single market is a stated priority for President of the EU Commission JeanClaude Juncker. Work is currently being undertaken by both the EU Commission and EU Parliament on proposed legislation and changes to the existing EU and national frameworks. In its published materials so far, the EU Commission has described the further harmonization of copyright exceptions and more effective cross-border enforcement of copyrights as potential areas of reform. In early 2015, The EU Parliament released a draft and finalized reports on the suggested copyright reforms and measures to be adopted for the single digital market. The initial draft report, authored by Julia Reda, a German Member of Parliament (MEP) from the Pirate Party, called for a rebalancing of copyright toward end users, creation of a broad research and educational exception including for “nonformal education,” as well as reforms relating to TPMs. These suggestions were subsequently watered down in the finalized report (which incorporated comments and amendments) published by the Committee on Legal Affairs. Membership and Ratification of International Treaties Germany has signed and acceded to all of the international treaties included in the Index, save for the Patent Law Treaty, which Germany has signed but not acceded to. Furthermore, the EU has concluded and ratified several FTAs with substantive IP provisions, such as the EU-Korea Trade Agreement of 2010. The EU has agreed in principle on a major trade agreement with Canada and is in negotiations with the United States on a trade agreement.

106

India Scores Indicator Patents, Related Rights, and Limitations 1. Patent term of protection 2. Patentability requirements 3. Patentability of computer-implemented inventions 4. Pharmaceutical-related patent enforcement and resolution mechanism 5. Legislative criteria and use of compulsory licensing of patented products and technologies 6. Patent term restoration for pharmaceutical products 7. Regulatory data protection term Total Score—Patents Copyrights, Related Rights, and Limitations 8. Copyright (and related rights) term of protection 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) 10. Availability of frameworks that promote cooperative action against online piracy 11. Scope of limitations and exceptions to copyrights and related rights 12. Digital rights management legislation 13. Clear implementation of policies requiring proprietary software used on government ICT systems to be licensed software Total Score—Copyrights Trademarks, Related Rights, and Limitations 14. Trademarks term of protection (renewal periods) 15. Nondiscrimination/nonrestrictions on the use of brands in packaging of different products 16. Ability of trademark owners to protect their trademarks: requisites for protection 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks 18. Availability of frameworks that promote action against online sale of counterfeit goods Total Score—Trademarks Trade Secrets and Market Access 19. Protection of trade secrets 20. Barriers to market access Total Score—Trade Secrets and Market Access Enforcement

Total Possible Score

Score 1 0 0 0 0 0 0 1

7

0.4758 0.25 0.25 0 0.25 0.25 1.47

6

1 1 0.25 0.25 0.25 2.75

5

0.25 0.25 0.5

2

58

Calculated as the average of the term for broadcasting rights (25 years); performer’s rights (50 years); and literary, artistic, and musical works (60 years), divided by the baseline term of 95 years.

107

21. Physical counterfeiting rates 22. Software piracy rates 23. Civil and procedural remedies 24. Preestablished damages and/or mechanisms for determining the amount of damages generated by infringement 25. Criminal standards including minimum imprisonment and minimum fines 26. Effective border measures Total Score—Enforcement Membership and Ratification of International Treaties 27. WIPO Internet Treaties 28. Singapore Treaty on the Law of Trademarks 29. Patent Law Treaty 30. At least one free trade agreement with substantive and/or specific IP provisions such as chapters on IP and separate provisions on IP rights provided it was signed after WTO/TRIPS membership Total Score—Treaties Total Overall Score

0.1859 0.460 0.25 0 0.25 0.25 1.33

6

0 0 0 0 0 7.05

4 30

Strengths and Weaknesses Key Areas of Strength  The government of India continued to make positive statements during 2015 on the need to introduce a strong IP environment  Ex officio powers were introduced in 2007 for the deputy and assistant commissioners of customs

Key Areas of Weakness  Patentability requirements outside international standards; confirmed in 2015 Controller General rulings  Regulatory data protection and patent term restoration not available  History of using compulsory licensing for commercial and nonemergency situations; expanded use being considered by the Indian government in 2015  2015 Supreme Court ruling on notice and takedown requirements for copyright-infringing content limits practical usability of already unclear system and laws  Poor application and enforcement of civil remedies and criminal penalties  Not a contracting party to any of the major international IP treaties referenced in the Index

59

Calculated based on the Global Measure of Physical Counterfeiting, where India ranked 7 out of 38 economies mapped. 60 Based on software piracy rates (60%) compiled by the BSA.

108

Spotlight on the National IP Environment Past Editions versus Current Scores As mentioned in the previous edition of the Index, the government led by Prime Minister Modi has made a number of positive announcements on the importance of IP rights and the need for India to align with international standards. At the time of research, a new National IP Rights Strategy document had yet to be released. In terms of the Index, India’s overall score has decreased to 7.05 from the 3rd edition total of 7.23. This decrease was driven primarily by the introduction of the Global Measure of Physical Counterfeiting, in which India ranked 7 out of 38 economies mapped. A number of positive steps taken in 2015 would have potentially increased India’s score. Specifically, the publication of new guidelines for patentability of CIIs would have provided a greater level of clarity on what until now was a gray area of patentability. Unfortunately, in late 2015, these guidelines were suspended until further review by the Indian authorities. More broadly, a number of concerns remain with India’s national IP environment: as noted in previous editions, India’s patentability requirements remain outside established international best practices, with 2015 rulings confirming long-standing interpretations; there is a lack of specific IP rights for the life sciences sector; the enforcement environment remains challenging with continued high levels of physical and online piracy; and India is not a contracting party to any of the international treaties included in the IP Index, nor has India concluded an FTA with substantial IP provisions since acceding to the TRIPS Agreement. Patents, Related Rights, and Limitations 2. Patentability requirements: As mentioned in previous editions, Indian patent law has in place an additional requirement to patentability that goes beyond the required novelty, inventive step, and industrial applicability requirements. Under Section 3(d) of the Indian Patent Act, there is an additional “fourth hurdle” with regard to inventive step and enhanced efficacy that limits patentability for certain types of pharmaceutical inventions and chemical compounds. A number of cases (most notably involving Novartis’ Glivec and Roche’s Tarceva) have established an interpretation of Indian patent law whereby Section 3(d) can be fulfilled only if the patent applicant can show that the subject matter of the patent application has an improved therapeutic efficacy compared with the structurally closest compound as published before the patent application had been filed (regardless of whether a patent application on the earlier compound was filed in India). More broadly, this interpretation and case law also denies patentees with protection that goes substantially beyond what was specifically disclosed in the patent application; compounds that fall within a chemical formula of a claimed group of compounds in a patent application, but that are not specifically disclosed in the patent, could be regarded as not protected. In 2015, these principles of interpretation were reaffirmed and invoked most notably in a July ruling by the Controller General, which upheld the invalidation of the patent for Roche’s Valcyte. 3. Patentability of computer-implemented inventions: The environment for protecting CIIs in India has been marred by uncertainty for a number of years. Existing guidance documents, including the Indian patent manual, did not provide clarity on the extent to which CIIs were patentable. Draft guidelines published in 2013 by the Controller General presented a rather narrow interpretation of what constituted 109

a CII and under what circumstances a CII was in fact patentable. Specifically, these draft guidelines suggested that CIIs applied or operating through a “general purpose known computer or related devices” were not patentable. In contrast, the guidelines published in August 2015 (Guidelines for Examination of Computer Related Inventions) provide for the broad patentability of CIIs including in operation through not only novel hardware but also “known hardware.” The publication of these guidelines and the potential expansion of the patenting of CIIs with the use of these new guidelines by the Controller General would have been a major step forward for India’s national IP environment and a boon to the software industry in India and beyond. Unfortunately, the Controller General of Patents announced in December 2015 that these guidelines would be “kept in abeyance” until further notice. 5. Legislative criteria and use of compulsory licensing of patented products and technologies: As noted in previous editions of the Index, Indian compulsory licensing legislation and the active issuing of such licenses for biopharmaceuticals outside of public emergencies is one of the primary reasons India’s IP rights regime continues to be an international outlier. At the time of research, no additional compulsory licenses for biopharmaceuticals had been issued by Indian authorities in 2015. Nevertheless, there were a number of negative developments. The Commerce and Industry Minister stated in response to parliamentary questions that, at the request of the Department of Health and Family Welfare, the government was still considering the issuance of a compulsory license for the oncology drug dasatinib. Copyrights, Related Rights, and Limitations 10. Availability of frameworks that promote cooperative action against online piracy: Specifically, the 2000 Information Technology Act, 2008 amendments, and the 2011 Information Technology (Intermediaries Guidelines) Rules appear to be in conflict with the 2012 Copyright Act amendments. The former puts forward relatively clear guidelines and requirements of expeditious removal of infringing material; the latter, conversely, only requires removal for a period of 21 days, with a court order required for any further action. Thus, the Indian system cannot be effectively used by rights holders. In the 2015 Supreme Court decision Shreya Singal v. Union of India, the court provided what could potentially set a negative precedent in the interpretation of these rules and laws. In a case primarily centering on the constitutionality of Section 66A of the Information Technology Act and its potential limitations on free speech, the court also outlined a fairly detailed interpretation of the meaning of Section 79 of the Information Technology Act, which sets the framework for exemptions from liability of Internet intermediaries including the requirements for expeditious removal of infringing material. Of note is that the court held that it was not up to the intermediary to make a judgment as to the potential infringing nature of a piece of information referred to in a notice. Rather, the court stated that this determination needed to be made through the judiciary and specifically that a court order needed to have been “passed asking it [the intermediary] to expeditiously remove or disable access to certain material.” In part, the court stated that its reasoning relied on what was deemed to be practical for Internet intermediaries and also what has been established as international best practices arguing that “it would be very difficult for intermediaries … to act when millions of requests are made and the intermediary is then to judge as to which of such requests are legitimate and which are not. We have been informed that in other economies worldwide this view has gained 110

acceptance, Argentina being in the forefront.” The best practices of Argentina notwithstanding (and, as noted above in the Index, Argentina suffers from high rates of piracy), given the number of online infringements, it is difficult to see how any enforcement requiring a court order is practical or would provide for the expeditious removal of infringing content. If the practical effect of this ruling is to further weaken the remedies available to rights holders in India, the score for this indicator will be reduced. Membership and Ratification of International Treaties India is not a contracting party to any of the international treaties included in the Index, nor has India concluded an FTA with substantial IP provisions since acceding to the TRIPS Agreement. Although Prime Minister Modi and German Chancellor Merkel publicly stated in October 2015 following a summit in India their desire to rekindle trade talks in 2015, no new rounds of negotiations have been scheduled for an India-EU FTA.

111

Indonesia Scores Indicator Patents, Related Rights, and Limitations 1. Patent term of protection 2. Patentability requirements 3. Patentability of computer-implemented inventions 4. Pharmaceutical-related patent enforcement and resolution mechanism 5. Legislative criteria and use of compulsory licensing of patented products and technologies 6. Patent term restoration for pharmaceutical products 7. Regulatory data protection term Total Score—Patents Copyrights, Related Rights, and Limitations 8. Copyright (and related rights) term of protection 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) 10. Availability of frameworks that promote cooperative action against online piracy 11. Scope of limitations and exceptions to copyrights and related rights 12. Digital rights management legislation 13. Clear implementation of policies requiring proprietary software used on government ICT systems to be licensed software Total Score—Copyrights Trademarks, Related Rights, and Limitations 14. Trademarks term of protection (renewal periods) 15. Nondiscrimination/nonrestrictions on the use of brands in packaging of different products 16. Ability of trademark owners to protect their trademarks: requisites for protection 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks 18. Availability of frameworks that promote action against online sale of counterfeit goods Total Score—Trademarks Trade Secrets and Market Access 19. Protection of trade secrets 20. Barriers to market access Total Score—Trade Secrets and Market Access Enforcement 21. Physical counterfeiting rates

Score

Total Possible Score

1 0.5 0 0 0 0 0 1.5

7

0.5261 0.25 0.5 0.25 0.25 0.25 2.02

6

1 1 0.25 0.25 0.25 2.75

5

0.25 0 0.25

2

0.1662

61

Calculated as the minimum term (50 years), divided by the baseline term of 95 years. Calculated based on the Global Measure of Physical Counterfeiting, where Indonesia ranked 6 out of 38 economies mapped. 62

112

22. Software piracy rates 23. Civil and procedural remedies 24. Preestablished damages and/or mechanisms for determining the amount of damages generated by infringement 25. Criminal standards including minimum imprisonment and minimum fines 26. Effective border measures Total Score—Enforcement Membership and Ratification of International Treaties 27. WIPO Internet Treaties 28. Singapore Treaty on the Law of Trademarks 29. Patent Law Treaty 30. At least one free trade agreement with substantive and/or specific IP provisions such as chapters on IP and separate provisions on IP rights provided it was signed after WTO/TRIPS membership Total Score—Treaties Total Overall Score

0.1663 0.25 0 0.25 0.25 1.07

6

1 0 0 0 1 8.59

4 30

Strengths and Weaknesses Key Areas of Strength  New notification system and blocking of infringing websites being implemented and used by local rights-holders  Basic IP framework in place including 20-year patent term of protection  FTA obligation for legal government software  Major auction sites provide notice and takedown for online counterfeiting

Key Areas of Weakness  Draft 2015 patent law includes localization provisions and technology transfer of all patented products  Persistent high levels of piracy  History of pharmaceutical compulsory licensing  No patent term restoration or regulatory data protection available  Limited protection for unregistered marks  Market access conditional on local manufacturing requirement or licensing IP

Spotlight on the National IP Environment Past Editions versus Current Scores Indonesia’s overall score has stayed roughly the same at 28% of the Index’s total possible score, having slightly decreased from a score of 8.61 in the previous edition to the current total of 8.59. Yet this lack of movement in the overall score masks important increases and decreases within the 6 categories of the Index. For example, with regard to Category 2: Copyrights, Related Rights, and Limitations, Indonesia’s score has increased due to increased antipiracy activity. Meanwhile, highlighting the challenges associated with measuring illicit trade and related enforcement efforts, the score for Category 5: Enforcement has decreased as a result of increased estimates of 63

Based on software piracy rates (84%) compiled by the BSA.

113

physical counterfeiting. Overall, while making marked progress over the past 2 years (particularly in the field of copyright), Indonesia’s national IP environment is still marked by large gaps in both the IP rights available and limited enforcement. Patents, Related Rights, and Limitations 2. Patentability requirements and 3. Patentability of computer-implemented inventions: The 2001 Indonesian Patent Law does not allow for second or medical use patents, and published, official guidelines are not in place. Despite this limitation, practice notes and experience by local legal practitioners suggest that “Swiss-style” claims are allowed. Similarly, with regard to CIIs, the environment is not clear. As noted in previous editions of the Index, Article 7 of the Indonesian Patent Act stipulates that “any theory and method in the field of science and mathematics” is not patentable and not to be considered an invention. As with second use claims, although there is no specific reference to software or CIIs, legal practice in Indonesia and existing case law suggest that the environment for patent protection for CIIs is challenging, with no clear guidance in place. Data from WIPO on the top fields of technology in Indonesian patent applications between 1999 and 2013 do not list computer, software, or related technologies in the top 10 technologies filed for. In 2015, the Indonesian government introduced a new draft patent law. This draft includes a number of important changes to the existing law, not all of them positive. First and foremost the new draft Article 19 seems to put forward a localization requirement not only through paragraph 1 with regard to the mandating of manufacturing of all patented products in Indonesia, but also through paragraph 2, which states that making use of the relevant patented product or process shall support domestic employment, investment, and technology transfer. As discussed in previous editions of the Index, in relation to indicator 20, Indonesia already has in place a set of policies that force rights holders to share their IP to gain access to the Indonesian market. Currently, these policies target the life sciences sector in particular. It would be a very negative development should this localization effort now be expanded further to include all sectors and potential patent holders. 5. Legislative criteria and use of compulsory licensing of patented products and technologies: Since the mid-2000s, the Indonesian government has issued nine “government use” licenses that override existing pharmaceutical patents primarily for hepatitis and HIV drugs. These licenses allow the government to exploit existing patent-protected products in the event of threats to national security or an urgent public need. The manner in which these licenses were issued appears to contradict Article 31 of the TRIPS Agreement. First, the issuing of these licenses took place without engaging the relevant rights holders on an alternative solution or obtaining their authorization. Second, the issuing of the licenses was conducted on a group basis as opposed to an individual basis as required by TRIPS. Last, there does not appear to be any specific recourse mechanism available that would allow a rights holder to appeal the issuing of these licenses, with the government’s decision, as stated by the relevant articles in the Patent Law, being defined as final. No new licenses were issued in 2015, but the legal framework for these licenses under the Patent Law was retained in the draft legislation described above that was submitted to the Indonesian House of Representatives.

114

Copyrights, Related Rights, and Limitations 10. Availability of frameworks that promote action against online piracy: As noted in the previous edition of the Index, in September 2014, Indonesia passed and signed into law a far-ranging new Copyright Act with a number of potentially important changes relating to the provision and enforcement of copyright. Chief among these was a new ministerial notification system on online infringement granting the Ministry of Communication and Informatics the power to block infringing websites. While these powers had been in existence since the late 2000s, it was unclear the extent to which they applied to potential online acts of copyright infringement. Last year’s legislation provides copyright holders this new avenue of action against online piracy. Implementing joint regulations between the Ministry of Law and Human Rights (which houses the Directorate General of IP) and the Ministry of Communication and Informatics were unveiled in July 2015 and are now in force. The Directorate General of IP operates an online notification system whereby rights holders can file a notice of infringement and request for the blocking of alleged infringing websites. In August 2015, the ministry took action, requesting that 22 websites be blocked by Indonesia’s major ISPs. The original request and notice of infringement were filed by the Association of Indonesian Film Producers, which in an interview with the Jakarta Post stated that online piracy had until now decimated the local film industry. Although the scale of copyright piracy (both physical and online) remains a serious challenge to rights holders—for example, the software piracy rate, estimated at 84% by the BSA, is one of the highest in the world—these legislative and regulatory steps taken by the Indonesian authorities and their continued enforcement and application are a significant achievement. This step in the right direction has resulted in an additional increase of Indonesia’s score on this indicator. Trademarks, Related Rights, and Limitations 16. Ability of trademark owners to protect their trademarks: requisites for protection; and 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks: As noted in previous editions of the Index, trademark protection in Indonesia is a challenge. Physical counterfeiting of goods is rife—particularly for medicines—and the legal framework is rudimentary with enforcement action limited. Raid statistics suggest that Indonesian authorities perform only a handful of raids against alleged IP infringers in a given year. Wellknown marks are offered only limited statutory and practical protection. Although unregistered trademarks are protected through Indonesia’s treaty obligations, under the current legal framework rights holders must register their trademarks before initiating actions. Moreover, local legal analysis suggests that Indonesia’s first-to-file system has been widely abused by local operators, who have registered internationally well-known marks. For example, a long-running dispute between the Indonesian National Sports Committee (KONI) and the International Olympics Committee on the use of the Olympic five-rings logo was only resolved this year through court action by the local Olympics Committee despite KONI having registered the logo with the Indonesian trademark authorities and actively using it since the late 2000s. The draft Trademark Law proposed by the Indonesian government and currently being considered by the Indonesian House of Representatives does not improve the existing framework, providing only minimal reference to well-known marks. Article 21 of the draft legislation states that a trademark application can be rejected on the basis of it 115

showing similarity to well-known marks, but well-known marks are not defined in the law and no list of remedies available is provided. While specifying overall usage, activity, and investment size as markers of a well-known mark, the accompanying explanatory note to the proposed legislation is not clear as to within which geographical jurisdiction its suggested parameters of evaluation would apply (i.e., including or excluding Indonesia in any potential analysis). More broadly, the proposed draft legislation is silent on what legal measures are available for rights holders, with no in-depth definition of types of infringement and remedies available. On the other hand, Indonesia acceded to the Madrid Protocol, an international registration of trademarks. Supplementing this with more clarity on well-known marks and more broadly the available legal remedies for rights holders would further strengthen Indonesia’s trademark environment. Membership and Ratification of International Treaties Indonesia scores low in its participation in and ratification of international treaties, mostly because Indonesia is not a contracting party to the Patent Law Treaty or the Singapore Treaty on the Law of Trademarks, and it has not concluded an FTA with substantial IP provisions since it acceded to TRIPS. Indonesia is a signatory to and has ratified the WIPO Internet Treaties.

116

Israel Scores Indicator Patents, Related Rights, and Limitations 1. Patent term of protection 2. Patentability requirements 3. Patentability of computer-implemented inventions 4. Pharmaceutical-related patent enforcement and resolution mechanism 5. Legislative criteria and use of compulsory licensing of patented products and technologies 6. Patent term restoration for pharmaceutical products 7. Regulatory data protection term Total Score—Patents Copyrights, Related Rights, and Limitations 8. Copyright (and related rights) term of protection 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) 10. Availability of frameworks that promote cooperative action against online piracy 11. Scope of limitations and exceptions to copyrights and related rights 12. Digital rights management legislation 13. Clear implementation of policies requiring proprietary software used on government ICT systems to be licensed software Total Score—Copyrights Trademarks, Related Rights, and Limitations 14. Trademarks term of protection (renewal periods) 15. Nondiscrimination/nonrestrictions on the use of brands in packaging of different products 16. Ability of trademark owners to protect their trademarks: requisites for protection 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks 18. Availability of frameworks that promote action against online sale of counterfeit goods Total Score—Trademarks Trade Secrets and Market Access 19. Protection of trade secrets 20. Barriers to market access Total Score—Trade Secrets and Market Access Enforcement

Score

Total Possible Score

1 1 1 0.5 1 1 0.3 5.8

7

0.6364 0.5 0.25 1 0 1 3.38

6

1 1 0.75 0.75 0 3.5

5

1 1 2

2

64

Calculated as the minimum term (70 years for anonymous works and 50 years for sound recordings), divided by the baseline term of 95 years.

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21. Physical counterfeiting rates 22. Software piracy rates 23. Civil and procedural remedies 24. Preestablished damages and/or mechanisms for determining the amount of damages generated by infringement 25. Criminal standards including minimum imprisonment and minimum fines 26. Effective border measures Total Score—Enforcement Membership and Ratification of International Treaties 27. WIPO Internet Treaties 28. Singapore Treaty on the Law of Trademarks 29. Patent Law Treaty 30. At least one free trade agreement with substantive and/or specific IP provisions such as chapters on IP and separate provisions on IP rights provided it was signed after WTO/TRIPS membership Total Score—Treaties Total Overall Score

0.6865 0.766 0.75 0.75 0.75 0.75 4.38

6

0.5 0 0.5 0 1 20.06

4 30

Strengths and Weaknesses Key Areas of Strength  Life sciences IP rights reform efforts in 2014 have considerably strengthened Israel’s IP environment  Strong protection for CIIs  Ex officio customs authority and strong customs agency

Key Areas of Weakness  Online copyright framework lacking—limited notice and takedown and no DRM laws  Accession to international IP-specific treaties and FTAs lacking

Spotlight on the National IP Environment Patents, Related Rights, and Limitations 3. Patentability of computer-implemented inventions: Beginning in the mid-2000s, the Israeli Patent Office reduced the number of CII patents issued and altered its interpretation of the relevant patent laws. As a result, a number of patent applications did not receive approval. In 2012, this policy was reversed and a new interpretation was issued; as a result, CII patents are now widely available and approved. Indeed, latest available patent statistics from WIPO show that patent applications in the field of computer technology constituted the second-largest category of applications in Israel at 13%.

65

Calculated based on the Global Measure of Physical Counterfeiting, where Israel ranked 26 out of 38 economies mapped. 66 Based on software piracy rates (30%) compiled by the BSA.

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6. Patent term restoration for pharmaceutical products: Like Canada and New Zealand, Israel was one of a small group of developed high-income OECD economies that did not have (and in the case of Canada and New Zealand, continue to not have) in place life science–specific IP rights in line with the highest international standards. Up until 2014, Israel did not offer patent restoration for pharmaceutical products. In 2014, and following long discussions with the USTR regarding Israel’s Special 301 report status and the development of a memorandum of understanding, the Israeli Knesset amended the Patent Act, introducing a five-year maximum term of restoration. 7. Regulatory data protection term: Article 47(D) to the Pharmacists Ordinance provides a term of protection for submitted clinical research data of 6.5 years if the first marketing approval of the product was received in any recognized economy, or 6 years if the first marketing approval of said product was received in Israel. While this is a positive feature of Israel’s regulatory and life science environment, this protection is currently not available to biological or large-molecule entities. This is a significant weakness in Israel’s IP rights environment and potentially undermines otherwise positive steps and achievements in recent years. At the time of research, the extension of data protection to also include biologics was being reviewed by the government of Israel. Copyrights, Related Rights, and Limitations 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking); 10. Availability of frameworks that promote cooperative action against online piracy; and 12. Digital rights management legislation: The protection of copyright online has long been a challenge for rights holders in Israel. Israeli industry figures published in 2011 suggested that approximately 95% of online music and 50% of film was pirated. No specific legal framework is currently in place with regard to notice and takedown mechanisms or other administrative or regulatory mechanisms to effectively enforce copyright and related rights in the online environment. Some case law (including the 2011 Association for the Protection of Cinematic Works v. Rotter.net Ltd) does establish the rights and responsibilities of ISPs with regard to secondary liability; however, this is not comprehensive or a substitute for a clear legal framework. Similarly, Israel does not have in place relevant TPM or DRM legislation. Proposals have been put forward in the Knesset in the past, but at the time of research, no legal framework was in place to ban of the use, manufacture, distribution, and other related activities of anti-circumvention devices. Enforcement 26. Effective border measures: Israeli law and case law provide clear ex officio authority to customs officials. The 2010 “Procedure for Intellectual Property” issued by the Israeli Tax Authority contains detailed guidance on the manner in which customs officials are allowed to take ex officio action against goods suspected of infringing IP rights without the need for rights holders to preregister these goods. In regard to in-transit goods, local legal reports suggest that customs officials will take action against suspected goods that are in transit to the Palestinian territories. However, it is not clear from existing guidelines, case law, or practice that Israeli 119

Customs would take action against suspected goods that are in transit to another destination. Membership and Ratification of International Treaties Israel scores low in its participation in and ratification of international treaties because it has not ratified the WIPO Internet Treaties or Patent Law Treaty, is not party to the Singapore Treaty on the Law of Trademarks, and has not concluded an FTA with substantial IP provisions since it acceded to TRIPS.

120

Italy Scores Indicator Patents, Related Rights, and Limitations 1. Patent term of protection 2. Patentability requirements 3. Patentability of computer-implemented inventions 4. Pharmaceutical-related patent enforcement and resolution mechanism 5. Legislative criteria and use of compulsory licensing of patented products and technologies 6. Patent term restoration for pharmaceutical products 7. Regulatory data protection term Total Score—Patents Copyrights, Related Rights, and Limitations 8. Copyright (and related rights) term of protection 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) 10. Availability of frameworks that promote cooperative action against online piracy 11. Scope of limitations and exceptions to copyrights and related rights 12. Digital rights management legislation 13. Clear implementation of policies requiring proprietary software used on government ICT systems to be licensed software Total Score—Copyrights Trademarks, Related Rights, and Limitations 14. Trademarks term of protection (renewal periods) 15. Nondiscrimination/nonrestrictions on the use of brands in packaging of different products 16. Ability of trademark owners to protect their trademarks: requisites for protection 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks 18. Availability of frameworks that promote action against online sale of counterfeit goods Total Score—Trademarks Trade Secrets and Market Access 19. Protection of trade secrets 20. Barriers to market access Total Score—Trade Secrets and Market Access Enforcement

Total Possible Score

Score 1 0.75 1 0.5 1 1 1 6.25

7

0.6667 0.5 0.5 0.5 0.5 0.75 3.41

6

1 1 0.75 0.75 0.5 4

5

0.75 1 1.75

2

67

Calculated as the average of the term of author’s protection (70 years), collective works (50 years), and performers and phonogram producers (70 years), divided by the baseline term of 95 years.

121

21. Physical counterfeiting rates 22. Software piracy rates 23. Civil and procedural remedies 24. Preestablished damages and/or mechanisms for determining the amount of damages generated by infringement 25. Criminal standards including minimum imprisonment and minimum fines 26. Effective border measures Total Score—Enforcement Membership and Ratification of International Treaties 27. WIPO Internet Treaties 28. Singapore Treaty on the Law of Trademarks 29. Patent Law Treaty 30. At least one free trade agreement with substantive and/or specific IP provisions such as chapters on IP and separate provisions on IP rights provided it was signed after WTO/TRIPS membership Total Score—Treaties Total Overall Score

0.568 0.5369 0.75 0.5 0.5 1 3.78

6

1 1 0.5 1 3.5 22.69

4 30

Strengths and Weaknesses Key Areas of Strength  Fairly advanced national IP environment  Application of patent requirements; sector-specific IP rights in place (e.g., RDP, patent term restoration)  Implementation of policies requiring the use of licensed software in public agencies  Protection for trademarks, including well-known marks  Protection for trade secrets

Key Areas of Weakness  Lack of a voluntary notice and takedown mechanism  Gaps in implementation of limitations on exceptions for copyrights  Relatively high level of physical counterfeiting and online piracy in comparison with other high-income economies  Significant delays and lack of expertise vis-à-vis IP rights within judicial system

Spotlight on the National IP Environment Patents, Related Rights, and Limitations 2. Patentability requirements and 3. Patentability of computer-implemented inventions: Under the 2005 Italian Industry Property Code, inventions must be new, involve an inventive step, and have an industrial application to be patentable. All new products or processes in any technology field are patentable inventions in Italy with generally standard exceptions. Biotechnology and biopharmaceutical patents are typically patentable, although therapeutic methods are not. Courts in Italy have denied patents on intermediate chemical products, such as active pharmaceutical ingredients, in the past; however, recent cases (such as Bayer Pharma S.p.A. v. Industriale Chimica S.p.A.) suggest a new tendency toward granting such patents. Software is 68

Calculated based on the Global Measure of Physical Counterfeiting, where Italy ranked 19 out of 38 economies mapped. 69 Based on software piracy rates (47%) compiled by the BSA.

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patentable to the extent that it has a technical character and effect beyond a generic computer program, as confirmed by a 2014 ruling by the Court of Turin. There is, on average, a three-year delay between patent filing and granting. Copyrights, Related Rights, and Limitations 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking): The Italian Copyright Law, No. 633, provides for general exclusive copyrights and neighboring rights, and Decree 70/2003 on Electronic Commerce introduced rights and penalties specific to the online sphere. Nevertheless, Law 67/2014 and Decree 28/2015 reduce or remove penalties for crimes that are punishable by five years’ imprisonment or less, including the majority of copyright violations. Although exceptions are identified, the language on these is ambiguous and thus introduces uncertainty as to the penalties applicable for copyright infringement. Copyright piracy is a major problem in Italy, with wide access to illegal cyberlockers and linking sites operated outside Italy. Estimates from the Sturza Institute place music piracy at about 50% and film piracy at just under 40%. Enforcement generally lags behind other European economies due to data privacy restrictions that limit prosecution of P2P file-sharing and delays in litigation. 10. Availability of frameworks that promote action against online piracy: Decree 70/2003 on E-Commerce introduced a partial notice and takedown system based on judicial or administrative order. A new implementing regulation, which entered into force in 2014, though not mandating a voluntary notice and takedown system with liability for ISPs that do not respond to rights holder independently of administrative intervention, does provide for a potential platform for a self-regulated process. Specifically, under the mechanism, rights holders may submit infringement notices to the Communications Regulatory Authority (AGCOM), which may both pass them on to ISPs as well as order takedown of the infringing content. The mechanism is intended to expedite the process, with administrative review and ISP response required on relatively short notice. Since the regulation’s entry into force at least 300 complaints were submitted to AGCOM and about one-third involved voluntary takedown of infringing content by ISPs (i.e., in response to rights holders’ notices relayed by AGCOM). In addition, a high percentage of cases overall were considered “serious piracy” and were fast-tracked by AGCOM. There is also a growing judicial basis for voluntary notice and takedown. For instance, in Yahoo! Italia and Yahoo! Inc. v. Reti Televisive Italiane S.p.A. (RTI) in 2015, the Court of Appeals of Milan held that although ISPs are not required to monitor hosted websites for infringing content, a notice of infringement from a rights holder constitutes sufficient basis for removing that content. 13. Clear implementation of policies and guidelines requiring that any proprietary software used on government ICT systems should be licensed software: The Digital Administrative Code (Decree 179, 2012) requires that all software used in public administration be licensed. Evidence on government spending on proprietary software licenses suggests that the rate of licensing is relatively high, although not necessarily taking place across the board. For example, data from the Bank of Italy, regularly reviewed by the Court of Auditors, reports that in 2014, total

123

spending on software licenses and related computer services at the regional, provincial, and municipal levels reached over 800 million euros. Trademarks, Related Rights, and Limitations 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks: The Italian Industrial Code provides general exclusive rights to trademark holders, protected at both the administrative and judicial levels. Despite high rates of counterfeiting in the economy, recent case law indicates that remedies are generally available for standard trademark violations when cases are brought. For instance, in 2014, the Court of Milan ruled in favor of a so-called “famous” sportswear mark in Italy, “PP,” invalidating a confusingly similar sign on the basis of commercial exploitation, erosion of profits, and brand dilution (as well as bad faith filing). In 2015, the Supreme Court (No. 1861) ruled against a copycat brand (“Divine & Divani”) of a registered brand, “Divani & Divani,” and remanded the case to the lower courts to determine damages, on the basis of likelihood of confusion and brand erosion. Enforcement 23. Civil and procedural remedies and 24. Preestablished damages and/or mechanisms for determining the amount of damages generated by infringement: Italian IP law provides rights holders with standard civil measures and penalties against infringement, including seizures, destruction of goods, and damages. Italy does not provide statutory damages for IP infringement; however, the Civil Code outlines a general mechanism for determining profits, including lost profits, unfair profits, and moral prejudice inflicted on the rights holder. Nevertheless, in practice, enforcement through the judicial system is a major problem in Italy. Injunctions are difficult to obtain, particularly for noncommercial-scale infringement, and significant limits to creating evidentiary bases exist due to privacy laws. The level of damages is highly unpredictable, with some instances of relatively high damages for certain types of infringement—such as for trade secret violations—while other types of infringement may secure relatively low levels of damages. In addition, even among the economy’s specialized IP Courts, judicial proceedings entail substantial delays, lack of expertise, and procedural hurdles. Processing of cases in high courts, including the Supreme Court, can take, on average, 5 years, with about 10-year delays in the lower courts. Membership and Ratification of International Treaties Italy has signed and acceded to all the international treaties included in the Index, save for the Patent Law Treaty, which Italy has signed but not acceded to. Furthermore, the EU has concluded and ratified several FTAs with substantive IP provisions, such as the EU-Korea Trade Agreement of 2010. The EU has agreed in principle on a major trade agreement with Canada and is in negotiations with the United States on a trade agreement.

124

Japan Scores Indicator Patents, Related Rights, and Limitations 1. Patent term of protection 2. Patentability requirements 3. Patentability of computer-implemented inventions 4. Pharmaceutical-related patent enforcement and resolution mechanism 5. Legislative criteria and use of compulsory licensing of patented products and technologies 6. Patent term restoration for pharmaceutical products 7. Regulatory data protection term Total Score—Patents Copyrights, Related Rights, and Limitations 8. Copyright (and related rights) term of protection 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) 10. Availability of frameworks that promote cooperative action against online piracy 11. Scope of limitations and exceptions to copyrights and related rights 12. Digital rights management legislation 13. Clear implementation of policies requiring proprietary software used on government ICT systems to be licensed software Total Score—Copyrights Trademarks, Related Rights, and Limitations 14. Trademarks term of protection (renewal periods) 15. Nondiscrimination/nonrestrictions on the use of brands in packaging of different products 16. Ability of trademark owners to protect their trademarks: requisites for protection 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks 18. Availability of frameworks that promote action against online sale of counterfeit goods Total Score—Trademarks Trade Secrets and Market Access 19. Protection of trade secrets 20. Barriers to market access Total Score—Trade Secrets and Market Access Enforcement 21. Physical counterfeiting rates

Score

Total Possible Score

1 1 1 0.5 1 1 0.8 6.3

7

0.5370 1 0.5 0.75 0.75 0.75 4.28

6

1 1 1 1 0.5 4.5

5

1 1 2

2

0.9571

70

Calculated as the minimum term (50 years), divided by the baseline term of 95 years. Calculated based on the Global Measure of Physical Counterfeiting, where Japan ranked 36 out of 38 economies mapped. 71

125

22. Software piracy rates 23. Civil and procedural remedies 24. Preestablished damages and/or mechanisms for determining the amount of damages generated by infringement 25. Criminal standards including minimum imprisonment and minimum fines 26. Effective border measures Total Score—Enforcement Membership and Ratification of International Treaties 27. WIPO Internet Treaties 28. Singapore Treaty on the Law of Trademarks 29. Patent Law Treaty 30. At least one free trade agreement with substantive and/or specific IP provisions such as chapters on IP and separate provisions on IP rights provided it was signed after WTO/TRIPS membership Total Score—Treaties Total Overall Score

0.8172 0.75 0.75 1 1 5.26

6

1 0 0 0 1 23.34

4 30

Strengths and Weaknesses Key Areas of Strength  Robust and sophisticated national IP framework in place  Life sciences IP rights in place and enforced  Strong protection for CIIs  Effective patent enforcement and resolution process through courts  Trademark-exclusive rights in place and generally enforced  Industry-based standards and policy on notice and takedown present relating to online counterfeit sales  Ex officio customs authority and intransit detainment present

Key Areas of Weakness  Accession to international IP-specific treaties and FTAs lacking—accession to TPP would change this  Limited notice and takedown mechanism in place

Spotlight on the National IP Environment Past Editions versus Current Scores Japan’s overall score remains roughly the same as in previous editions of the Index, with a small increase to 23.34 (78%) of the Index’s total possible score. This change in score is a result of the replacement of the GTRIC-e measure of physical counterfeiting with the Global Physical Counterfeiting Measure. Overall, Japan maintains a strong national IP enforcement with a sophisticated legal framework and a strong enforcement environment particularly with regard to the prevention of counterfeit goods. Its lower score relative to other OECD high-income economies is primarily the result of its low participation and score in Category 6: Membership and 72

Based on software piracy rates (19%) compiled by the BSA.

126

Ratification of International Treaties. Japan is one of the negotiating parties to the TPP, and the accession by Japan to this treaty would increase its score for this category and overall for the Index. Copyrights, Related Rights, and Limitations 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking); and 25. Criminal standards including minimum imprisonment and minimum fines: Launched in 2014, the Manga-Anime Guardians Project initiative continued into 2015 with the 2nd phase of the antipiracy campaign launched in October. As noted in previous editions of the Index, this public-private partnership (which includes a broad coalition of industry and content creators and the Japanese Ministry of Economy, Trade, and Industry [METI]) aims to both reduce the availability of illegal content of anime and manga materials as well as raise awareness and link consumers to legitimate sources. Reports from METI suggest that a significant drop in pirated anime and manga materials have been achieved through phases of the program. According to METI, the first phase of the program saw close to 170,000 infringing copies being removed, corresponding to an estimated 70% of all illegal anime and manga content online. Reports from early 2015 suggest the 2nd phase of the initiative has been as successful, with over 700,000 illegal anime and manga files being deleted. Also in 2015, enforcement efforts by the Japanese National Police Agency against alleged copyright infringers increased. In a coordinated effort in February, 40 police departments and enforcement agencies raided a number of suspected sites and arrested close to 40 individuals on suspicion of copyright infringement. Enforcement 21. Physical counterfeiting rates: The Japanese Patent Office released the results of its annual counterfeiting survey in the first quarter of 2015. The results of the survey are based on responses from the most IP-dependent Japanese companies and institutions as measured by rates of applications for patent, trademark, and utility model protection. For the latest year, the survey received over 4,000 responses. As in previous years, the results show that counterfeiting is a growing problem even in an economy like Japan that has a strong national IP framework and enforcement environment. Specifically, the results suggest a slight increase in the number of companies that have suffered losses due to counterfeiting (up to 22%); the majority of these losses (60%) occurred online. The survey also found that the vast majority of companies (67%) that have suffered losses had done so in China. This survey corroborates the findings of the Global Counterfeiting Measure introduced in this year’s edition of the Index. While Japan itself is found to have a relatively low estimated share of global counterfeiting, China’s share corresponds to roughly twothirds of the global total. Membership and Ratification of International Treaties Japan scores low in its participation in and ratification of international treaties, mostly because Japan is not a contracting party to the Patent Law Treaty or the Singapore Treaty on the Law of Trademarks. Japan is one of the negotiating parties to the TPP, for which negotiations concluded in October 2015. The accession by Japan to this

127

treaty would increase its score in this category. Japan is a signatory and has ratified the WIPO Internet Treaties.

128

Malaysia Scores Indicator Patents, Related Rights, and Limitations 1. Patent term of protection 2. Patentability requirements 3. Patentability of computer-implemented inventions 4. Pharmaceutical-related patent enforcement and resolution mechanism 5. Legislative criteria and use of compulsory licensing of patented products and technologies 6. Patent term restoration for pharmaceutical products 7. Regulatory data protection term Total Score—Patents Copyrights, Related Rights, and Limitations 8. Copyright (and related rights) term of protection 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) 10. Availability of frameworks that promote cooperative action against online piracy 11. Scope of limitations and exceptions to copyrights and related rights 12. Digital rights management legislation 13. Clear implementation of policies requiring proprietary software used on government ICT systems to be licensed software Total Score—Copyrights Trademarks, Related Rights, and Limitations 14. Trademarks term of protection (renewal periods) 15. Nondiscrimination/nonrestrictions on the use of brands in packaging of different products 16. Ability of trademark owners to protect their trademarks: requisites for protection 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks 18. Availability of frameworks that promote action against online sale of counterfeit goods Total Score—Trademarks Trade Secrets and Market Access 19. Protection of trade secrets 20. Barriers to market access Total Score—Trade Secrets and Market Access Enforcement 21. Physical counterfeiting rates

Score

Total Possible Score

1 1 0.25 0 0 0 0.5 2.75

7

0.5373 0.75 0.75 0.5 0.75 0.5 3.78

6

1 1 0.5 0.5 0.25 3.25

5

0.5 1 1.5

2

0.2974

73

Calculated by dividing the minimum term of protection of 50 years by the baseline term of 95 years. Calculated based on the Global Measure of Physical Counterfeiting, where Malaysia ranked 11 out of 38 economies mapped. 74

129

22. Software piracy rates 23. Civil and procedural remedies 24. Preestablished damages and/or mechanisms for determining the amount of damages generated by infringement 25. Criminal standards including minimum imprisonment and minimum fines 26. Effective border measures Total Score—Enforcement Membership and Ratification of International Treaties 27. WIPO Internet Treaties 28. Singapore Treaty on the Law of Trademarks 29. Patent Law Treaty 30. At least one free trade agreement with substantive and/or specific IP provisions such as chapters on IP and separate provisions on IP rights provided it was signed after WTO/TRIPS membership Total Score—Treaties Total Overall Score

0.4675 0.5 0.5 0.5 0.25 2.5

6

1 0 0 0 1 14.78

4 30

Strengths and Weaknesses Key Areas of Strength  Strong package of copyright reforms passed in 2012—broadly in line with international best practices  Five-year RDP term in place  Accession to TPP would increase score and strengthen national IP environment

Key Areas of Weakness  Despite intensifying efforts, levels of counterfeiting, software, and music piracy are still high  De facto RDP full term of protection is not offered to new products  Patent term restoration not allowed  Ex officio powers not used by customs officials

Spotlight on the National IP Environment Past Editions versus Current Scores Malaysia’s overall score has increased to 14.78 from 14.62 in the previous edition of the Index. Measured as a percentage, the score has stayed the same as last year at 49%. This change in score is a result of the replacement of the GTRIC-e measure of physical counterfeiting with the Global Physical Counterfeiting Measure. Malaysia is a negotiating party to the TPP agreement. The accession by Malaysia to the TPP and adoption of the IP standards enshrined within the agreement would significantly strengthen Malaysia’s national IP environment, particularly with regard to the life sciences. Patents, Related Rights, and Limitations 6. Patent term restoration for pharmaceutical products: Malaysia does not currently allow patent term restoration for pharmaceutical products. Industry sources suggest that discussions on reforming the Patent Act to include a term of restoration have taken place, but at the time of research no official legislation had been 75

Based on software piracy rates (54%) compiled by the BSA.

130

introduced. The agreed text of the TPP (of which Malaysia is a negotiating party) released in November 2015 contains very clear requirements that contracting parties make available a term of patent restoration for unreasonable delays. However, upon finalization of negotiations in early October 2015, the Malaysian Deputy Health Minister Datuk Seri Dr Hilmi Yahaya was quoted by local news sources as saying: “The Health Ministry has announced that we do not agree on the extension of the duration of patency of the medicines as it will burden the people.” Subsequent to the publication of this report, the Ministry of Health released a statement by Yahaya clarifying this remark arguing that regulatory delays in Malaysia were within international norms, thus precluding the need for any restoration period. Providing biopharmaceutical innovators a full term of patent exclusivity in line with international best practices and standards is an essential component of incentivizing R&D and investment in new medical technologies. Introducing a term of patent restoration for any delays caused through the regulatory review process would be a positive step in strengthening Malaysia’s IP environment as it relates to the life sciences. 7. Regulatory data protection term: As noted in previous editions of the Index, Malaysia introduced a 5-year term of RDP protection in 2011. While this is a positive achievement, challenges remain. Specifically, the full term of protection is not offered to new products introduced in Malaysia. Instead, the term of protection begins whenever a product was introduced globally. This significantly weakens the actual exclusivity and incentive being offered to pharmaceutical innovators through RDP. Recent academic research published in the Journal of Intellectual Property Rights shows the negative impact of this measure by quantifying the actual length of the term of protection provided. Since its introduction in 2011, the average effective term of protection has been just over 43 months (i.e., about 3.5 years for the 10 products that have been granted data exclusivity). This is considerably lower than the statutory term of 5 years. RDP is an essential IP right for the life sciences sector—in particular for biologics—providing a tangible incentive to the investment and research required to develop new drugs and medical technologies. The agreed text of the TPP (of which Malaysia is a negotiating party) released in November 2015 contains very clear requirements that contracting parties make available a minimum period of 5 years’ protection for submitted clinical data (with 8 years for biologics) as part of a market registration application. The adoption of these requirements will significantly strengthen the IP environment as it relates to the life sciences in Malaysia. Enforcement 26. Effective border measures: As noted in previous editions of the Index, Malaysian customs officials are explicitly granted ex officio powers through Section 70 of the Trademark Act. The Act states: “Any authorized officer may detain or suspend the release of goods which, based on prima facie evidence that he has acquired, are counterfeit trade mark goods.” However, practice and evidence from the legal community suggests that these powers are not being used to their full effect. Rights holders do not have the option of registering their products and brands with customs officials. Instead, the notification system in place requires rights holders to preemptively apply for the detention of suspected infringing counterfeit goods specifying the time and place of importation. The Malaysian customs authorities do not publish annual seizure statistics or systematic reports on their activity against 131

physical counterfeit goods. However, looking at other international bodies, Malaysia is described as one of the main transit hubs and sources of counterfeit goods. Europol and the European Commission in 2015 Situation Report on Counterfeiting in the European Union described Malaysia as a source economy for counterfeit consumer and luxury goods entering the EU. Indeed, with regard to goods in transit, the Trademark Act does not provide customs officials with seizure authority even with a rights holder’s notice. Membership and Ratification of International Treaties In 2014, Malaysia acceded to the WIPO Internet Treaties. It is also one of the negotiating parties to the TPP. Negotiations concluded in October 2015. As noted in respect to its life sciences IP environment, the accession by Malaysia to this treaty and adoption of the IP standards enshrined within the TPP would significantly strengthen Malaysia’s national IP environment. Malaysia has not signed, ratified, or acceded to any of the other international treaties included in the Index. In addition to the TPP, Malaysia has been in FTA negotiations with the EU since 2010 and has concluded seven rounds of negotiation. No new rounds are currently planned.

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Mexico Scores Indicator Patents, Related Rights, and Limitations 1. Patent term of protection 2. Patentability requirements 3. Patentability of computer-implemented inventions 4. Pharmaceutical-related patent enforcement and resolution mechanism 5. Legislative criteria and use of compulsory licensing of patented products and technologies 6. Patent term restoration for pharmaceutical products 7. Regulatory data protection term Total Score—Patents Copyrights, Related Rights, and Limitations 8. Copyright (and related rights) term of protection 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) 10. Availability of frameworks that promote cooperative action against online piracy 11. Scope of limitations and exceptions to copyrights and related rights 12. Digital rights management legislation 13. Clear implementation of policies requiring proprietary software used on government ICT systems to be licensed software Total Score—Copyrights Trademarks, Related Rights, and Limitations 14. Trademarks term of protection (renewal periods) 15. Nondiscrimination/nonrestrictions on the use of brands in packaging of different products 16. Ability of trademark owners to protect their trademarks: requisites for protection 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks 18. Availability of frameworks that promote action against online sale of counterfeit goods Total Score—Trademarks Trade Secrets and Market Access 19. Protection of trade secrets 20. Barriers to market access Total Score—Trade Secrets and Market Access Enforcement

Score

Total Possible Score

1 0.5 0 0.25 1 0 0.25 3

7

0.7976 0.25 0 0.5 0 0.5 2.04

6

1 1 0.5 0.25 0.25 3

5

0.5 0.5 1

2

76

Calculated as the average of the term of an author’s economic rights (100 years), the term for sound recordings and performances (75 years), and the term for video recordings and broadcasts (50 years), divided by the baseline term of 95 years.

133

21. Physical counterfeiting rates 22. Software piracy rates 23. Civil and procedural remedies 24. Preestablished damages and/or mechanisms for determining the amount of damages generated by infringement 25. Criminal standards including minimum imprisonment and minimum fines 26. Effective border measures Total Score—Enforcement Membership and Ratification of International Treaties 27. WIPO Internet Treaties 28. Singapore Treaty on the Law of Trademarks 29. Patent Law Treaty 30. At least one free trade agreement with substantive and/or specific IP provisions such as chapters on IP and separate provisions on IP rights provided it was signed after WTO/TRIPS membership Total Score—Treaties Total Overall Score

0.5877 0.4678 0.5 1 0.75 0 3.29

6

1 0.5 0 0 1.5 13.83

4 30

Strengths and Weaknesses Key Areas of Strength  Fair and transparent use of compulsory licensing  Validation of digital copyright in 2014 amendments to broadcast retransmission rules  Use of licensed software in government agencies  Preestablished damages for copyright infringement  Recent efforts to streamline and harmonize the criminal justice system  Signatory to WIPO Internet Treaties

Key Areas of Weakness  Ambiguity surrounding patent linkage and RDP; barriers to extension to biologics  Lack of patent term restoration for pharmaceutical patents  Insufficient prosecution of trade secret violations  Lack of sufficient framework to promote action against online piracy  No trademark opposition prior to registration  Exclusive rights lacking for wellknown unregistered marks  Gaps in application of civil remedies and criminal penalties  Ineffective border measures

Spotlight on the National IP Environment Past Editions versus Current Scores Mexico’s score dropped from 49% of the overall score (with a score of 14.55) in the 3rd edition of the Index to 46% (with a score of 13.83) in the 4th edition. Little progress was made in 2015 on key issues including copyrights, online piracy, and counterfeiting. A degree of enforcement efforts took place, but much more is needed, 77

Calculated based on the Global Measure of Physical Counterfeiting, where Mexico ranked 22 out of 38 economies mapped. 78 Based on software piracy rates (54%) compiled by the BSA.

134

on top of legislative and administrative reform. Moreover, a handful of steps backward occurred in relation to the protection of pharmaceutical IP rights and indirect requirements for technology transfer in new energy policies entering into effect in 2015. Mexico is a negotiating party to the TPP agreement. The accession by Mexico to the TPP and adoption of the IP standards enshrined within the agreement would strengthen Mexico’s national IP environment. Patents, Related Rights, and Limitations 4. Pharmaceutical-related patent enforcement and resolution mechanism: The biopharmaceutical industry reports that it continues to experience major challenges with the enforcement of patents in Mexico. It is not clear that formulation patents are recognized consistently by the Federal Commission for the Protection against Sanitary Risks (COFEPRIS) when approving follow-on products; in addition, evidence suggests that COFEPRIS continues to approve the use or import of large quantities of APIs under patent protection for testing purposes. Where cases of infringement are brought, substantial delays at both the administrative and judicial levels hinder rights holders’ ability to secure damages effectively (reaching a total of about 10 years on average). Nevertheless, in a positive step for rights holders, a Mexican court ruled in 2015 that notification of patent holders and their ability to be heard during the market authorization process (and not only after) is a constitutional right and should have a legal basis within the Linkage Regulation. However, it remains to be seen how this ruling will be applied by authorities in practice. 7. Regulatory data protection term: In June 2012, COFEPRIS published guidelines that provide a maximum of five years’ protection against the use of undisclosed test data by any person for the purpose of marketing approval. However, the effective application of the guidelines remains an ongoing concern. One specific issue is the extent to which RDP will be granted to both large and small molecules. On top of ongoing uncertainty in the legal framework, in 2015 Mexican authorities reportedly indicated that RDP would not be considered as applicable to biologics, although the extent to which this approach would remain in place in relation to Mexico’s forthcoming obligations under the TPP Agreement (which includes an RDP term for biologics) is not clear. Copyrights, Related Rights, and Limitations Copyright area of note: No major movement occurred on amendments to the Copyright Law, noted in last year’s edition of the Index, that would introduce a graduated user warning system and ISP liability for online copyright infringement. Generally speaking, both physical and digital piracy continue to represent major challenges for rights holders. The Attorney General (Procuraduría General) estimates that in 2015 the copyright (and consumer brand) industries will lose about 13 billion pesos (over USD750 million) due to pirated and counterfeit products. Moreover, according to the Mexican Intellectual Property Association, about 60% of the population purchases pirated goods, representing a value of at least 7% of GDP. Trademarks, Related Rights, and Limitations 16. Ability of trademark owners to protect their trademarks: requisites for protection: As noted in previous editions of the Index, the Industrial Property Law establishes the exclusive right to use a mark upon registration. However, unregistered 135

trademarks are offered a certain degree of protection, regardless of whether use occurs within the jurisdiction of Mexico or abroad. An unregistered trademark proprietor will be able to file a cancellation action against a registration based on prior use; however, the proprietor of the unregistered trademark must apply for and be awarded registration prior to such action. Furthermore, legislation does not provide the owner of the unregistered trademark with exclusive rights. Thus, unregistered trademark owners remain exposed to potential damage by use of an identical or confusingly similar mark, without the possibility of initiating legal action. Trade Secrets and Market Access 20. Barriers to market access: Though generally speaking Mexico has scaled back its use of mandatory localization policies, including limits of FDI and local content requirements, mandatory requirements for localization have increased for certain sectors. For instance, the energy and gas sector is subject to new local content requirements, including transfer of technology, which entered into force in 2015. Under these requirements, the minimum level of local content across the supply chain must be 25% as of 2015 and is set to rise to 35% by 2025. Such requirements include the potential for forced sharing of IP assets as part of acquiring the local content. Enforcement 25. Criminal standards including minimum imprisonment and minimum fines: The Industrial Property and Copyright Laws and the Criminal Code outline standard fines and terms of imprisonment for criminal infringement, the upper ends of which can be considered sufficiently deterrent. However, in practice, actual prosecution and handing down of sentences are rare, and in cases where punishments are given, the penalties incurred are too low to be a deterrent. In a positive move in 2015, a streamlined criminal justice system was introduced, though implementation must still occur. The new system is aimed at speeding up dispute resolution, bringing cases to completion more quickly, increasing use of alternative dispute resolution mechanisms, supplying greater resources, and reducing red tape. Membership and Ratification of International Treaties Mexico has signed and ratified the WIPO Internet Treaties. However, overall, Mexico scores fairly low in its participation in and implementation of international treaties, partly because it is not a contracting party to the Patent Law Treaty and it has only signed, not ratified, the Singapore Treaty on the Law of Trademarks. Furthermore, Mexico’s free trade agreements with various trade partners, including NAFTA with the United States and Canada, the EU, and Japan, were enacted prior to its membership in the TRIPS Agreement or only contain very general and brief IP provisions. Mexico is a negotiating party to the TPP. Negotiations concluded in October 2015.

136

New Zealand Scores Indicator Patents, Related Rights, and Limitations 1. Patent term of protection 2. Patentability requirements 3. Patentability of computer-implemented inventions 4. Pharmaceutical-related patent enforcement and resolution mechanism 5. Legislative criteria and use of compulsory licensing of patented products and technologies 6. Patent term restoration for pharmaceutical products 7. Regulatory data protection term Total Score—Patents Copyrights, Related Rights, and Limitations 8. Copyright (and related rights) term of protection 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) 10. Availability of frameworks that promote cooperative action against online piracy 11. Scope of limitations and exceptions to copyrights and related rights 12. Digital rights management legislation 13. Clear implementation of policies requiring proprietary software used on government ICT systems to be licensed software Total Score—Copyrights Trademarks, Related Rights, and Limitations 14. Trademarks term of protection (renewal periods) 15. Nondiscrimination/nonrestrictions on the use of brands in packaging of different products 16. Ability of trademark owners to protect their trademarks: requisites for protection 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks 18. Availability of frameworks that promote action against online sale of counterfeit goods Total Score—Trademarks Trade Secrets and Market Access 19. Protection of trade secrets 20. Barriers to market access Total Score—Trade Secrets and Market Access Enforcement

Score

Total Possible Score

1 0.75 1 0.5 1 0 0.5 4.75

7

0.6679 0.75 0.75 1 1 0.75 4.91

6

1 1 1 1 0.5 4.5

5

1 1 2

2

79

Calculated as the average of the minimum terms of protection for literary, dramatic, musical, or artistic works (50 years); sound recordings and films (50 years); communication works (50 years); and copyright works made by a person employed or engaged by the crown under a contract of service, apprenticeship, or service (100 years), divided by the baseline term of 95 years.

137

21. Physical counterfeiting rates 22. Software piracy rates

0.9280

23. Civil and procedural remedies 24. Preestablished damages and/or mechanisms for determining the amount of damages generated by infringement 25. Criminal standards including minimum imprisonment and minimum fines 26. Effective border measures Total Score—Enforcement Membership and Ratification of International Treaties 27. WIPO Internet Treaties 28. Singapore Treaty on the Law of Trademarks 29. Patent Law Treaty 30. At least one free trade agreement with substantive and/or specific IP provisions such as chapters on IP and separate provisions on IP rights provided it was signed after WTO/TRIPS membership Total Score—Treaties Total Overall Score

1

0.881

0.75 0.75 0 4.22

6

0 1 0 0 1 21.38

4 30

Strengths and Weaknesses Key Areas of Strength  TPP agreement will bring in patent term restoration for biopharmaceuticals  TPP will introduce an eight-year term of protection for biologics  Copyright (Infringing File Sharing) Amendment Act and corresponding regulation provide a relatively strong framework against online piracy  Legislation and common law provide protection for unregistered marks  Exclusive rights for trademarks are in place and are generally enforced

Key Areas of Weakness  Practical availability of remedies under Copyright (Infringing File Sharing) Amendment Act in doubt— rights holders concerned over high cost of action  No ex officio powers for customs officials

Spotlight on the National IP Environment Past Editions versus Current Scores New Zealand’s total score has increased slightly to 21.38 from 21.34 in the previous edition of the Index. As a percentage, New Zealand’s overall score remains the same as in the previous edition at 71%. The change in score is a result of the replacement of the GTRIC-e measure of physical counterfeiting with the Global Physical 80

Calculated based on the Global Measure of Physical Counterfeiting, where New Zealand ranked 35 out of 38 economies mapped. 81 Based on software piracy rates (20%) compiled by the BSA.

138

Counterfeiting Measure. Overall, New Zealand maintains a relatively strong national IP environment albeit with particular weaknesses in regard to IP rights in the life sciences sector. However, many of these weaknesses will be addressed by the successful implementation of the TPP agreement, to which New Zealand is a negotiating party. As a result, New Zealand should see its overall Index score increase in future editions. The government of New Zealand is also committed to the passing of plain packaging legislation, a move that would undermine the country’s commitment to trademarks. Patents, Related Rights, and Limitations 6. Patent term restoration for pharmaceutical products: New Zealand does not offer patent term restoration for pharmaceuticals. Although discussed throughout the period leading up to the passing of patent reforms, the final 2013 Patent Act did not address this issue. The agreed text of the TPP (of which New Zealand is a negotiating party) released in November 2015 contains very clear requirements that contracting parties make available a term of patent restoration for unreasonable delays. The government of New Zealand has publicly stated that the TPP agreement will require it to restore a term of protection for pharmaceutical products caused by regulatory delays. New Zealand is one of few OECD economies that up until now has not offered a defined term of restoration for innovators in the life sciences. Defining and introducing this measure would be a significant step forward for the IP environment as it relates to the life sciences in New Zealand. 7. Regulatory data protection term: Section 23B of the Medicines Act provides protection for submitted clinical test data for a period of five years. As noted in previous editions of the Index, this time frame is significantly shorter than the baseline term (that of the EU) used in this Index as well as the term in place in most other high-income OECD economies. The agreed text of the TPP released in November 2015 contains very clear requirements that contracting parties make available a minimum period of eight years’ protection for submitted clinical data for biologics as part of a market registration application. This would mean an increase in the current RDP term for biologics in New Zealand by three years. Copyrights, Related Rights, and Limitations 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking): As noted in previous editions of the Index, in 2011 New Zealand introduced a graduated response scheme through the Copyright (Infringing File Sharing) Amendment Act, further outlined in the Copyright (Infringing File Sharing) Regulations. Specifically, this scheme amended the Copyright Act and introduced a mechanism whereby rights holders can notify Internet protocol address providers (IPAPs) about a suspected infringement; IPAPs are then obliged to pass on a “Detection Notice” directly to the account holder/suspected infringer. Under the terms of the regulations, continued suspected infringement can result in two further notices being issued and the rights holder ultimately being able to apply to the Copyright Tribunal for compensation of up to NZ$15,000. The rights holder can also apply for a court order for the alleged infringer’s Internet access to be suspended for a period of up to six months. Although the scheme was a positive step when it was introduced, today the overall effectiveness of the legislation is being questioned by rights holders 139

due to the NZ$25 charge that is applied for each notice submitted. The total cost of three notices being sent out and an additional NZ$200 charge to file a complaint with the Copyright Tribunal multiplied by the total number of estimated infringements taking place has de facto reduced the capability of rights holders to work through the regime. The number of cases filed before the tribunal has steadily decreased and one major association, Recorded Music New Zealand, has reportedly reduced the number of notices sent out due to the high cost and has also stopped filing cases before the tribunal. If rights holders continue to face difficulties in applying existing measures against the illegal use of their content, New Zealand’s score for this indicator will be reduced. Trademarks, Related Rights, and Limitations 15. Nondiscrimination/nonrestrictions on the use of brands in packaging of different products: As noted in previous editions of the Index, the government of New Zealand announced in February 2013 that it would move ahead with introducing standardized (plain) packaging legislation for certain products. However, the government has since indicated that it will await the outcomes of the legal cases filed against the Australian government before moving further with the legislation. The introduction of such a measure applied to any industry would significantly restrict the use of brands, trademarks, and trade dress on retail packaging, undermining the benefits of trademarks to businesses and consumers alike and setting a negative precedent for IP policy. It would also decrease New Zealand’s score in this indicator from 1 to 0. Membership and Ratification of International Treaties New Zealand scores low in its participation in and ratification of international treaties, mostly because it is not a contracting party to the Patent Law Treaty or the WIPO Internet Treaties. New Zealand is a signatory to and has ratified the Singapore Treaty on the Law of Trademarks. New Zealand is one of the negotiating parties to the TPP. Negotiations concluded in October 2015. The accession by New Zealand to this treaty would increase its score in this category and, as noted, in other relevant categories of the Index.

140

Nigeria Scores Indicator Patents, Related Rights, and Limitations 1. Patent term of protection 2. Patentability requirements 3. Patentability of computer-implemented inventions 4. Pharmaceutical-related patent enforcement and resolution mechanism 5. Legislative criteria and use of compulsory licensing of patented products and technologies 6. Patent term restoration for pharmaceutical products 7. Regulatory data protection term Total Score—Patents Copyrights, Related Rights, and Limitations 8. Copyright (and related rights) term of protection 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) 10. Availability of frameworks that promote cooperative action against online piracy 11. Scope of limitations and exceptions to copyrights and related rights 12. Digital rights management legislation 13. Clear implementation of policies requiring proprietary software used on government ICT systems to be licensed software Total Score—Copyrights Trademarks, Related Rights, and Limitations 14. Trademarks term of protection (renewal periods) 15. Nondiscrimination/nonrestrictions on the use of brands in packaging of different products 16. Ability of trademark owners to protect their trademarks: requisites for protection 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks 18. Availability of frameworks that promote action against online sale of counterfeit goods Total Score—Trademarks Trade Secrets and Market Access 19. Protection of trade secrets 20. Barriers to market access Total Score—Trade Secrets and Market Access Enforcement 21. Physical counterfeiting rates

Total Possible Score

Score 1 0 0 0 1 0 0 2

7

0.7482 0.25 0.25 0.25 0 0 1.49

6

1 1 0.25 0.5 0 2.75

5

0 0.75 0.75

2

0.2483

82

Calculated as the minimum term (70), divided by the baseline term of 95 years. Calculated based on the Global Measure of Physical Counterfeiting, where Nigeria ranked 9 out of 38 economies mapped. 83

141

22. Software piracy rates 23. Civil and procedural remedies 24. Preestablished damages and/or mechanisms for determining the amount of damages generated by infringement 25. Criminal standards including minimum imprisonment and minimum fines 26. Effective border measures Total Score—Enforcement Membership and Ratification of International Treaties 27. WIPO Internet Treaties 28. Singapore Treaty on the Law of Trademarks 29. Patent Law Treaty 30. At least one free trade agreement with substantive and/or specific IP provisions such as chapters on IP and separate provisions on IP rights provided it was signed after WTO/TRIPS membership Total Score—Treaties Total Overall Score

0.1984 0.25 0 0.25 0 0.93

6

0.5 0 1 0 1.5 9.42

4 30

Strengths and Weaknesses Key Areas of Strength  New Cybercrime Law strengthens protection for trademarks  Potential use of relevant provisions of the Cybercrime Law in lieu of specific and comprehensive DRM legislation

Key Areas of Weakness  No patent term restoration or regulatory data protection for biopharmaceuticals  Rudimentary digital copyright regime  High rates of software piracy  Limited and sporadic enforcement of trademarks  High rates of counterfeit goods  Low participation in international IP treaties

Spotlight on the National IP Environment Past Editions versus Current Scores Nigeria’s total score has decreased from 9.81 in the previous edition of the Index to 9.42. As a percentage, Nigeria’s overall score has dropped marginally to 31%. This change in score is a result of the replacement of the GTRIC-e measure of physical counterfeiting with the Global Physical Counterfeiting Measure. This new measure (suggesting a higher level of physical counterfeiting in Nigeria) correlates more strongly with other indicators of Nigeria’s enforcement environment and piracy levels including indicator 22, the BSA survey of software piracy. Copyrights, Related Rights, and Limitations 12. Digital rights management legislation: As noted in previous editions of the Index, Nigeria does not have in place TPM or DRM legislation outlawing the use, sale, manufacture, and distribution of circumvention devices. In 2015, the Cybercrime 84

Based on software piracy rates (81%) compiled by the BSA.

142

Bill was passed and signed into law by then President Jonathan. Although it is unclear the extent to which this law would apply within a copyright context, Part III of the law does contain fairly robust, if rudimentary and non-copyright-specific, language that makes it an offense to use or make available any “devices primarily designed to overcome security measures in any computer, computer system or network.” If future legal practice indicates that the Cybercrime Act is successfully being applied within a copyright context, in lieu of specific and comprehensive DRM legislation, then the score for this indicator would increase. Trademarks, Related Rights, and Limitations 16. Ability of trademark owners to protect their trademarks: requisites for protection; and 17: Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks: As noted in previous editions of the Index, Nigeria has in place a basic framework for the protection of registered and unregistered trademarks. The Trademarks Act provides exclusive rights to registered trademarks under Articles 4 through 6. As mentioned above, 2015 finally saw the passage and signing into law of the Cybercrime Bill. While it remains unclear the extent to which the provisions of the bill dealing with the circumvention of electronic devices will apply to a copyright context and, in particular, the circumvention of TPMs, the final bill strengthens the existing legal framework for trademarks. Specifically, the law includes clear provisions on cybersquatting, making it a criminal offense subject to fines and potential imprisonment. Despite these positive legislative steps, rights holders in Nigeria continue to face significant challenges to the enforcement of their IP rights. For example, international consumergoods manufacturer Philips expanded its “Philips Buy Original” campaign into Nigeria in 2015 due to the widespread availability of counterfeit Philips products. Similarly, the availability of counterfeit medicines remains a serious problem. A poll conducted early in 2015 by NOIPolls found that close to three-quarters of Nigerians surveyed believed that there was a “prevalence of fake pharmaceutical drugs in Nigeria.” Almost 20% of respondents claimed to have personally been the victims of counterfeit or substandard medicines. Enforcement 26. Effective border measures: The presence of counterfeit and substandard consumer goods is a huge challenge to rights holders in Nigeria. Specifically, the number of counterfeit goods entering Nigeria from abroad, while already high, has increased substantially in recent years. The Standards Organisation of Nigeria (SNO)—which is mandated to ensure and inspect the quality of goods in Nigeria— stated in August 2015 that there had been a 200% increase in the volume of substandard goods over the past four years. Significantly, the SNO attributed this increase to a greater foreign inflow of goods and the 2011 suspension of its presence at Nigerian ports where the majority of counterfeit goods enter the economy. While the Nigerian Customs Service has the main responsibility for border enforcement, other government agencies (including the SNO) also have powers of enforcement. For example, the Nigerian Copyright Commission (NCC) has, through Section 38 of the Copyright Act, granted its inspectors broad law enforcement powers including that of ex officio seizure, detention, and arrest. In contrast, border officials do not have ex officio powers. The Customs and Excise Management Act does not explicitly provide ex officio powers to border officials with regard to goods suspected of infringing IP 143

rights bound for Nigeria or in transit. Section 44 of the Copyright Act does provide for a notification system whereby rights holders can register their rights with the Customs Service asking that any imported good infringing their rights be prohibited. While the NCC actively works together with the Customs Service in seizing infringing goods (including the joint seizure of shipping containers entering Nigeria), stronger border enforcement provisions and their active application by the Nigerian Customs Service would provide a more effective framework. Membership and Ratification of International Treaties Nigeria scores low in its participation in and ratification of international treaties, mostly because it is not a contracting party to the Singapore Treaty on the Law of Trademarks and it has not concluded a major FTA post-TRIPS membership that includes substantial provisions on IP rights. Nigeria is a signatory to but has not ratified the WIPO Internet Treaties, and it is a signatory to and has ratified the Patent Law Treaty.

144

Peru Scores Indicator Patents, Related Rights, and Limitations 1. Patent term of protection 2. Patentability requirements 3. Patentability of computer-implemented inventions 4. Pharmaceutical-related patent enforcement and resolution mechanism 5. Legislative criteria and use of compulsory licensing of patented products and technologies 6. Patent term restoration for pharmaceutical products 7. Regulatory data protection term Total Score—Patents Copyrights, Related Rights, and Limitations 8. Copyright (and related rights) term of protection 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) 10. Availability of frameworks that promote cooperative action against online piracy 11. Scope of limitations and exceptions to copyrights and related rights 12. Digital rights management legislation 13. Clear implementation of policies requiring proprietary software used on government ICT systems to be licensed software Total Score—Copyrights Trademarks, Related Rights, and Limitations 14. Trademarks term of protection (renewal periods) 15. Nondiscrimination/nonrestrictions on the use of brands in packaging of different products 16. Ability of trademark owners to protect their trademarks: requisites for protection 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks 18. Availability of frameworks that promote action against online sale of counterfeit goods Total Score—Trademarks Trade Secrets and Market Access 19. Protection of trade secrets 20. Barriers to market access Total Score—Trade Secrets and Market Access Enforcement 21. Physical counterfeiting rates

Total Possible Score

Score 1 0.25 0 0 1 0 0.25 2.5

7

0.7485 0.25 0 0.25 0.5 0.25 1.99

6

1 1 0.25 0.5 0.25 3

5

0.25 0.75 1

2

0.2186

85

Calculated as the minimum term (70), divided by the baseline term of 95 years. Calculated based on the Global Measure of Physical Counterfeiting, where Peru ranked 8 out of 38 economies mapped. 86

145

22. Software piracy rates 23. Civil and procedural remedies 24. Preestablished damages and/or mechanisms for determining the amount of damages generated by infringement 25. Criminal standards including minimum imprisonment and minimum fines 26. Effective border measures Total Score—Enforcement Membership and Ratification of International Treaties 27. WIPO Internet Treaties 28. Singapore Treaty on the Law of Trademarks 29. Patent Law Treaty 30. At least one free trade agreement with substantive and/or specific IP provisions such as chapters on IP and separate provisions on IP rights provided it was signed after WTO/TRIPS membership Total Score—Treaties Total Overall Score

0.3587 0.25 0.25 0.25 0.5 1.81

6

1 0 0 1 2 12.3

4 30

Strengths and Weaknesses Key Areas of Strength  Basic 20-year patent term of protection in place  Basic exclusive rights for copyright in place  Government campaigns directed toward reducing enterprise-level software piracy  Basic legal framework for trademark enforcement  Ex officio and in-transit customs detainment provided for in legislation

Key Areas of Weakness  No patent examination process in place  Pharmaceutical and CII patentability very limited  No patent term restoration; RDP for biologics  Lack of effective pharmaceuticalrelated patent enforcement and resolution mechanism  Rudimentary digital copyright regime  No notice and takedown  High rates of counterfeiting  Weak enforcement environment

Spotlight on the National IP Environment Past Editions versus Current Scores Peru’s total score has fallen slightly from 42% of the total possible score (with a score of 12.68) in the 3rd edition of the Index to 41% in the 4th edition (with a score of 12.3). This decline is due primarily to a reduction in the score for indicator 21, as a result of the replacement of the GTRIC-e measure of physical counterfeiting with the Global Physical Counterfeiting Measure, as well as an increasing trend toward limiting the ability to patent and protect existing patents, particularly for pharmaceutical products. The year 2014–15 also saw a tendency toward extending exceptions to copyright through several iterations of amendments (including those aimed at educational, public, and social use) that do not contain necessary limitations 87

Based on software piracy rates (65%) compiled by the BSA.

146

on abuse of these exceptions. At the same time, some progress was made on software licensing in both the public and private spheres, though a great deal more progress is needed. Peru is a negotiating party to the TPP agreement. The accession by Peru to the TPP and adoption of the IP standards enshrined within the agreement would significantly strengthen Peru’s national IP environment, particularly with regard to the life sciences. Patents, Related Rights, and Limitations 2. Patentability requirements: Peru’s Industrial Property Rights Law establishes the protection of patents provided they meet the requirements of novelty, inventiveness, and susceptibility to industrial application. However, the patentability requirements lack clarity as to the protection of biotechnologically derived pharmaceutical products. In addition, Peru does not consider treatment methods as patentable subject matter, and the Andean Court of Justice has barred the recognition of second medical use patents within Andean Community member economies. The patent examination process involves major delays, and patent authorities tend to lack technical expertise. Indeed, the patent office, INDECOPI, reported in 2015 that between 2010 and 2014 it rejected 50% of pharmaceutical patent applications, including second use, method, and biotechnology patents relating to several AIDS and cancer treatments. In doing so, patent officials reiterated that while based on a technical evaluation as well as existing laws governing the Andean Community, its approach is also intended to ensure access to medicines by limiting the scope of patentability of pharmaceuticals and may not necessarily match the approach taken in other economies. 4. Pharmaceutical-related patent enforcement and resolution mechanism: Under Article 16.10.3 of the United States-Peru Trade Promotion Agreement (USPTPA), Peru is obligated to ensure patent holders are made aware of potentially infringing biopharmaceutical applications prior to market authorization. The Peruvian Health Authority maintains a publicly available list of drug registration applications on its website; however, it alone is not sufficient to provide an effective patent enforcement system. It does not address existing challenges in relation to the ability to secure timely relief through the court system, which can take, on average, more than four years. 5. Legislative criteria and use of compulsory licensing of patented products and technologies: In 2014–15, the Ministry of Health along with several nongovernmental organizations requested a compulsory license on the antiretroviral atanazavir. In 2015, the Ministry of Health issued a Supreme Decree for the compulsory license; however, approval was not obtained from certain government departments, including the Ministry of Economy and Ministry of Justice. Rather, the patent holder and the Peruvian government ultimately came to an alternative agreement. Nevertheless, the case suggests a fragmented approach within the Peruvian government toward the use of compulsory licensing. 6. Patent term restoration for pharmaceutical products: Peru has not implemented patent term restoration provisions in its law as is required by Article 16.9.6(c) of the USPTPA.

147

Copyrights, Related Rights, and Limitations 10. Availability of frameworks that promote action against online piracy: Peru has failed to make provisions for the notice and takedown of infringing content online, despite its obligation to do so in Article 29(b)(ix) of the USPTPA. 11. Scope of limitations and exceptions to copyrights and related rights: Peruvian law provides a list of limitations and exceptions to copyright. In late 2014, the Peruvian Congress passed Law 2314/2012, which increases exceptions for use of copies for educational purposes and for libraries. Specifically, the measure provides for academic exceptions to copyright for public distribution to staff and students, including copying of the entire work as long as it is not intended for commercial purposes. In 2015, additional amendments to the copyright law were discussed that would further expand exceptions to copyright for public use and for so-called “social” or personal events. 13. Clear implementation of policies and guidelines requiring that any proprietary software used on government ICT systems to be licensed software: Peru has complied with its obligations under Article 16.7.6 of the USPTPA through the Software Legalization Decree (Decreto Supremo No. 013-2003-PCM), which requires the use of legal software by public entities and provides for the establishment of effective controls to ensure legal software use. Though Peru continues to be delinquent in meeting its full obligations in terms of implementation, significant evidence shows that a wide range of government departments request official approval for purchasing software licenses. In addition, the IP office, INDECOPI, has strengthened efforts to improve business use of licensed software. Throughout 2015, the agency conducted a campaign aimed at reducing illegal software use and increasing registration and proof of licensed software in businesses by issuing warning letters to and auditing businesses that had not produced verification of licensed software. Trademarks, Related Rights, and Limitations 16. Ability of trademark owners to protect their trademarks: requisites for protection; and 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks: Peru has a basic framework in place for protecting registered trademarks and well-known marks. However, the national law lacks clarity, jurisprudence, and Andean Community Legislation on the distinction between well-known marks, famous marks, and marks with a reputation, and the protection afforded to them. Some clarity is provided in case law, which indicates that it is unnecessary to prove bad faith registration in order to secure protection for a well-known mark. In addition, existing precedent suggests that awareness of a mark by 60% of the public is sufficient for establishing knowledge of the market. In regard to the effect of a mark’s notoriety in other economies, notoriety in an economy that is a member of the Andean Community will have binding effect, whereas notoriety in all other economies will have informative effect only. Trade Secrets and Market Access 19. Protection of trade secrets: Peruvian law provides for a limited level of trade secret protection, which is derived from unfair competition law. A 2014 report from 148

the OECD notes that the Peruvian approach allows only protection for the legal right of “fair competition” irrespective of other rights affected by violations of trade secrets. In addition, to date no noted criminal enforcement of trade secret violations has taken place. Moreover, evidence suggests that it is arduous to prove in administrative and judicial proceedings the unauthorized disclosure of trade secrets by former employees. Enforcement 23. Civil and procedural remedies and 25. Criminal standards including minimum imprisonment and minimum fines: Peru has a limited legal framework for civil and criminal remedies; however, it has made efforts to strengthen enforcement for IP-related infringement. For example, recent amendments increased the minimum sentencing for copyright infringement to four or more years and established the creation of four specialized IP courts and one special appeals court with national jurisdiction on IP crimes. Nevertheless, the overall enforcement environment remains weak. Prosecutors do not pursue piracy cases through to the final stages of judgment and the judiciary often lacks independence in relation to sensitive IP decisions. For criminal prosecutions, delays can last between three and five years and the judiciary typically views IP crimes as benign. As a result, Peru maintains high levels of piracy and has been largely ineffective in deterring or changing the culture of piracy in the economy. 26. Effective border measures: Peru provides for both ex officio and in-transit custom measures under Legislative Decree No. 1092 of 2008 and its regulation, Supreme Decree No. 003-2009-E. However, Peru still struggles with enforcement at its borders, with widespread availability of counterfeit and pirated products. Membership and Ratification of International Treaties Of the international treaties covered in the Index, Peru is only a contracting party to the WIPO Internet Treaties. The U.S.-Peru Trade Promotion Agreement includes substantial provisions on IP rights. Peru’s lack of accession to the Patent Law Treaty is in breach of its commitments under the USPTPA. Peru is also one of the negotiating parties to the TPP. Negotiations concluded in October 2015.

149

Poland Scores Indicator Patents, Related Rights, and Limitations 1. Patent term of protection 2. Patentability requirements 3. Patentability of computer-implemented inventions 4. Pharmaceutical-related patent enforcement and resolution mechanism 5. Legislative criteria and use of compulsory licensing of patented products and technologies 6. Patent term restoration for pharmaceutical products 7. Regulatory data protection term Total Score—Patents Copyrights, Related Rights, and Limitations 8. Copyright (and related rights) term of protection 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) 10. Availability of frameworks that promote cooperative action against online piracy 11. Scope of limitations and exceptions to copyrights and related rights 12. Digital rights management legislation 13. Clear implementation of policies requiring proprietary software used on government ICT systems to be licensed software Total Score—Copyrights Trademarks, Related Rights, and Limitations 14. Trademarks term of protection (renewal periods) 15. Nondiscrimination/nonrestrictions on the use of brands in packaging of different products 16. Ability of trademark owners to protect their trademarks: requisites for protection 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks 18. Availability of frameworks that promote action against online sale of counterfeit goods Total Score—Trademarks Trade Secrets and Market Access 19. Protection of trade secrets 20. Barriers to market access Total Score—Trade Secrets and Market Access Enforcement

Score

Total Possible Score

1 0.5 0.25 0.25 1 1 1 5

7

0.6388 0.25 0.5 0.25 0.25 0.5 2.38

6

1 1 0.5 0.5 0.25 3.25

5

0.5 0.75 1.25

2

88

Calculated as the average of the term of author’s protection (70 years), artistic performances (50 years), and photograms and videograms (50 years), divided by the baseline term of 95 years.

150

21. Physical counterfeiting rates 22. Software piracy rates 23. Civil and procedural remedies 24. Preestablished damages and/or mechanisms for determining the amount of damages generated by infringement 25. Criminal standards including minimum imprisonment and minimum fines 26. Effective border measures Total Score—Enforcement Membership and Ratification of International Treaties 27. WIPO Internet Treaties 28. Singapore Treaty on the Law of Trademarks 29. Patent Law Treaty 30. At least one free trade agreement with substantive and/or specific IP provisions such as chapters on IP and separate provisions on IP rights provided it was signed after WTO/TRIPS membership Total Score—Treaties Total Overall Score

0.6389 0.4990 0.5 0.5 0.25 1 3.37

6

1 1 0.5 1 3.5 18.75

4 30

Strengths and Weaknesses Key Areas of Strength  Significant effort to strengthen legal framework for IP protection over the past 15–20 years  Patentability framework fairly in line with EU standards (with exceptions)  Certain sector-specific IP rights available (e.g., RDP, patent term extension)  Moderate licensing of software by public agencies  Police efforts to combat online piracy

Key Areas of Weakness  Gaps in legal basis for third-party/ISP liability for copyright infringement  Overly broad limitations and exceptions for copyright  Fairly weak enforcement of IP infringement (with some exceptions)  Relatively high levels of physical counterfeiting and online piracy in comparison with other high-income economies  Judicial enforcement sluggish, with lack of attention to cases of IP infringement and generally nondeterrent penalties

Spotlight on the National IP Environment Patents, Related Rights, and Limitations 2. Patentability requirements and 3. Patentability of computer-implemented inventions: Under the 2000 Industrial Property Act, for a patent to be valid it must be new, involve an inventive activity, and be industrially applicable. The invention must be physical or chemical in nature and constitute a tangible product or a material result of application of a method. Biotechnology patents are available in certain areas, including isolated biologic material (as long as it involves a change in technical 89

Calculated based on the Global Measure of Physical Counterfeiting, where Poland ranked 24 out of 38 economies mapped. 90 Based on software piracy rates (51%) compiled by the BSA.

151

characteristics) and second medical use, but generally the Polish Patent Office (PPO) takes a slightly more restrictive approach to patenting biotech materials and diagnostic methods compared with other economies. Computer programs are excluded from patentability in the Industrial Property Act, and the PPO has traditionally rejected software patents, even those that are approved by the EPO. However, since 2012, the Polish Supreme Administrative Court has held in several rulings that the PPO should use the same patentability requirements as the EPO vis-àvis CIIs, though a change in approach by the PPO has not yet materialized. Patenting statistics suggest that a small fraction of software patents issued by the EPO are granted in Poland. In addition, by some estimates, delays at the PPO range from three to six years from the filing to the granting of patents. Copyrights, Related Rights, and Limitations 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking): Polish copyright law provides standard exclusive rights for authors, but no specific measures exist that target the digital and online sphere. Online piracy constitutes a significant challenge in Poland. This is particularly due to a weak legal basis for intermediary or ISP liability for infringing content; an extremely broad private-use exception (with no distinction made between legal and illegal sources in personal use and a very wide allowance for free distribution); and lack of penalties available for downloading on a personal scale. Piracy levels are high and growing. Local estimates place the use of pirated sites at 75% of total Internet use, particularly streaming services and e-auction sites. In addition, Ministry of Culture data suggest that close to 50% of Poles download movies illegally at least once per week. The most recent (2015) estimates from the BSA suggest that 80% to 90% of software products sold in Poland (via auction sites) are pirated, with many involving fake license keys. Total losses to the Polish economy from video piracy alone are estimated by local legal experts at 600 million zloty (USD160 million), with the figure set to rise to 1.8– 6.1 billion zloty by 2018. There is a general lack of knowledge and education among the public regarding online piracy. Moreover, enforcement at the judicial level is weak. A recent Constitutional Court decision, in relation to a case against the cable network operator UPC Poland by the Polish Filmmakers Association for rebroadcasting without rights-holder permission, lowers the amount of fines available for copyright infringement. Previously, damages and fines in relation to copyright infringement stood at three times the amount of licensing fees due; the Constitutional Court ruling revokes this preestablished standard, thereby weakening a key existing channel in Poland for deterring online piracy. Trademarks, Related Rights, and Limitations 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks: The Polish Industrial Property Act and Act on Combating Unfair Competition provide general exclusive rights to trademark holders, protected at both the administrative and judicial levels. Case law suggests that protection of these rights in practice is mixed. For example, although Polish courts have a history of trying cybersquatting disputes in favor of well-known mark holders (for example, a Microsoft case against sales of its domain name in Poland to third parties), a high level of cybersquatting continues to exist in Poland. Polish courts will also rule in favor of established or famous marks in cases involving dilution or 152

likelihood of confusion (for example, Hasbro Inc. v. Simba Toys Polska sp. z o.o in regard to the brands “My Sweet Pony” and “My Little Pony,” based on the potential for confusion between the newer Polish mark and the U.S. company’s established mark). Nevertheless, Poland has a relatively high level of counterfeit goods compared with other EU economies, as both a source and a destination economy. Government reports from 2015 suggest an increasing prevalence of counterfeit medicines, with the WHO estimating that Poles spend about 100 million zloty (USD25 million) on counterfeit drugs annually. Enforcement 25. Criminal standards including minimum imprisonment and minimum fines: Although Polish intellectual property law provides for criminal penalties for infringement, these are considered to be too low or limited in scope. Patent and trademark infringement, including production of counterfeit medicines, carry prison terms of only two years. In addition, copyright infringement can bring up to five years’ imprisonment, but only in instances of reproduction of works for the purpose of dissemination. In practice, courts tend to take very little action against IP infringement, although recent years have seen more activity. For example, a 2015 ruling by the Slupsk District Court involved at least a moderate sentencing of three years’ imprisonment for distribution of pirated software on the auction site Allegro. Court cases are reported to be lengthy, with proceedings lasting an average of two to three years, and often lacking in transparency and IP expertise. Polish police tend to be more active on the IP front, particularly vis-à-vis online piracy, although much more is needed. In 2015, the Department for Fighting Cybercrime carried out a significant volume of arrests, raids of pirated materials and tools, and closure of websites distributing unauthorized copies of copyrighted material. Membership and Ratification of International Treaties Poland has signed and acceded to all the international treaties included in the Index, save for the Patent Law Treaty, which Poland has signed but not acceded to. Furthermore, the EU has concluded and ratified several FTAs with substantive IP provisions, such as the EU-Korea Trade Agreement of 2010. The EU has agreed in principle on a major trade agreement with Canada and is in negotiations with the United States on a trade agreement.

153

Russia Scores Indicator Patents, Related Rights, and Limitations 1. Patent term of protection 2. Patentability requirements 3. Patentability of computer-implemented inventions 4. Pharmaceutical-related patent enforcement and resolution mechanism 5. Legislative criteria and use of compulsory licensing of patented products and technologies 6. Patent term restoration for pharmaceutical products 7. Regulatory data protection term Total Score—Patents Copyrights, Related Rights, and Limitations 8. Copyright (and related rights) term of protection 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) 10. Availability of frameworks that promote cooperative action against online piracy 11. Scope of limitations and exceptions to copyrights and related rights 12. Digital rights management legislation 13. Clear implementation of policies requiring proprietary software used on government ICT systems to be licensed software Total Score—Copyrights Trademarks, Related Rights, and Limitations 14. Trademarks term of protection (renewal periods) 15. Nondiscrimination/nonrestrictions on the use of brands in packaging of different products 16. Ability of trademark owners to protect their trademarks: requisites for protection 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks 18. Availability of frameworks that promote action against online sale of counterfeit goods Total Score—Trademarks Trade Secrets and Market Access 19. Protection of trade secrets 20. Barriers to market access Total Score—Trade Secrets and Market Access Enforcement 21. Physical counterfeiting rates

Score

Total Possible Score

1 0.25 0.25 0 0 1 0.6 3.1

7

0.7491 0.5 0.5 0 0.25 0 1.99

6

1 1 0.25 0.25 0 2.5

5

0.25 0.25 0.5

2

0.3492

91

Calculated by dividing the minimum term of protection of 70 years by the baseline term of 95 years. Calculated based on the Global Measure of Physical Counterfeiting, where Russia ranked 13 out of 38 economies mapped. 92

154

22. Software piracy rates 23. Civil and procedural remedies 24. Preestablished damages and/or mechanisms for determining the amount of damages generated by infringement 25. Criminal standards including minimum imprisonment and minimum fines 26. Effective border measures Total Score—Enforcement Membership and Ratification of International Treaties 27. WIPO Internet Treaties 28. Singapore Treaty on the Law of Trademarks 29. Patent Law Treaty 30. At least one free trade agreement with substantive and/or specific IP provisions such as chapters on IP and separate provisions on IP rights provided it was signed after WTO/TRIPS membership Total Score—Treaties Total Overall Score

0.3893 0.5 0.25 0 0.5 1.97

6

1 1 1 0 3 13.06

4 30

Strengths and Weaknesses Key Areas of Strength  A 2015 extension of the 2013 online piracy amendments to cover all forms of content (except photography)  Contracting party to all international treaties included in the Index  Six-year regulatory data protection term introduced in 2010  Ex officio powers for customs officials

Key Areas of Weakness  Increasingly punitive localization requirements targeting specific sectors including life sciences  Regulatory data protection still not implemented  Limited DRM legislation  High levels of online and physical piracy  Poor application and enforcement of civil remedies and criminal penalties

Spotlight on the National IP Environment Past Editions versus Current Scores Russia’s overall score has decreased to 13.06 compared to 13.54 in the previous edition of the Index. This decrease amounts to a 1 percentage point drop to 44% of the total possible score, mostly because of 2 developments. The first is that increased requirements amount to a de facto localization of production and local development for biopharmaceuticals. The second is that the GTRIC-e measure of physical counterfeiting was replaced with the Global Physical Counterfeiting Measure, which correlates more strongly with other indicators of Russia’s enforcement environment and piracy levels including indicator 22, the BSA survey of software piracy. Patents, Related Rights, and Limitations 7. Regulatory data protection term: Under its WTO commitments and the 2010 Law of Medicines, Russia has committed to implementing an RDP term of six years. 93

Based on software piracy rates (62%) compiled by the BSA.

155

This positive step has significantly strengthened the existing framework and protection mechanisms for pharmaceutical innovation. However, as noted in previous editions of the Index, a lack of progress remains in implementing this commitment and developing a fully functioning form of RDP. This lack of direction has been compounded by uncertainty in the interpretation of the existing legal framework by the Russian judiciary. For example, in a case that hinged on whether a local generic manufacturer (BioIntegrator) relied on clinical data submitted by an innovator (Novartis), the latter initially lost its case of exclusivity infringement in spring 2015. However, this decision was reversed later in the year by an Arbitration Court that held that the local manufacturing company did in fact infringe Novartis’s exclusivity and its submitted clinical research data as part of its original market authorization application. Local legal analysis suggests that the judgment provides important clarification on the scope of protection provided to clinical data submitted, strengthening innovators’ rights. Copyrights, Related Rights, and Limitations 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) and 10. Availability of frameworks that promote action against online piracy: As noted in previous editions of the Index, over the past two years Russia has introduced and implemented a range of new laws and regulations to help combat the economy’s high level of online infringement. In 2013, a number of amendments to the Civil Code Part IV were passed, including a notice and takedown provision with regard to the responsibilities of “information intermediaries” and an obligation to act on a notice of infringement from a rights holder. The amendments also introduced interim judicial measures, designating the Moscow City Court as the first instance of such application and as possessing the power to issue temporary injunctions. Furthermore, a rights holder could also apply to the Federal Service for Supervision in the Sphere of Telecom, Information Technologies, and Mass Communication (the ROSKOMNADZOR) for the enforcement of these provisions. Specifically, ROSKOMNADZOR was given the power to issue notices to the hosting service provider requiring (1) notification to the alleged infringer, and (2) if no action is taken, the restriction of access to the alleged infringing material. However, at the time of enactment it was not clear if these provisions were limited to particular types of copyrighted material and content. Specifically, the amendments referred only to “exclusive film rights, including movies and TV films.” In 2015, new amendments were enacted that have expanded the applicability of these amendments to a broader set of copyrighted material, with the notable exception of photographic images, which have been excluded. In addition to these legislative changes, there were also some important developments concerning the enforcement of copyright online. In July 2015, one of Russia’s largest social networking websites, VK.com (also known as vKontakte), announced that it had reached a settlement with Sony Music, one of three plaintiffs (the other two being Universal Music Russia and Warner Music U.K.) in a high-profile infringement case brought against VK.com. As part of the agreement, VK.com is reported to begin offering a licensed, legal subscription service to copyrighted material. Up until these developments, VK.com was widely considered a leading host of illegal content globally and was most recently included in the USTR’s 2014 Out-of-Cycle Review of Notorious Markets published in March 2015. The changing of VK.com’s model from one based on the circulation of infringing content 156

to a service providing legitimate content would be an important and positive step for Russia’s enforcement environment. Trade Secrets and Market Access 20. Barriers to market access: As noted in previous editions of the Index, the Russian government has targeted innovation as a main impetus behind diversifying and modernizing its economy primarily through the Strategy for Innovative Development of the Russian Federation 2020 (2020 Strategy), introduced in 2011. The 2020 Strategy targets a number of sectors for development such as aerospace and nuclear energy, nanotechnology, medical technologies, ICT, and alternative fuels. A major part of these efforts has been policies that aim to localize the R&D and manufacture of these technologies. A significant focus of Russia’s biopharmaceutical policies has been on attempting to localize biopharmaceutical research and innovation. In 2010, the government passed Federal Law 61-FZ on the Circulation of Medicines stipulating that clinical trials for innovative and generic medicines (bioequivalence studies) must be conducted in Russia if the product is to be submitted for registration. In 2011, the Ministry of Economic Development issued Order No. 211, which created a price preference of 15% afforded to locally produced drugs for state and municipal procurement and the opportunity for local manufacturers (foreign firms excluded) of products on the EDL to adjust product prices annually accounting for inflation rates. Subsequently, a stricter definition of “local production” has been adopted that requires a biopharmaceutical company to locally produce the active pharmaceutical ingredient or final deliverable form of a product in Russia to qualify for these benefits and also puts in place a requirement that imported pharmaceutical products could not be considered for state tenders if two or more generic equivalents were produced domestically. Together these localization policies create a significant market access barrier for rights holders, in effect conditioning access to Russia’s healthcare market on fulfilling the localization of production and development. New measures introduced and/or coming into effect in 2015 have exacerbated this already difficult situation. For instance, new regulations with regard to the compilation of drug registration dossiers has made market registration conditional on good manufacturing practices inspection by Russian officials, consequently favoring local manufacturing. Import restrictions on foreign-produced biopharmaceutical products have also been proposed by the Russian government, as has a redefinition of local manufacturing. Together these measures (scheduled to be applied in 2016) would even more strongly condition access to the Russian biopharmaceutical on complete local manufacturing and development. These developments and the overall deterioration of the localization environment in Russia have resulted in a lowering of the score for this indicator. Membership and Ratification of International Treaties Russia is a contracting party to and has signed and acceded to all of the international treaties included in the Index. However, full implementation and enforcement of the obligations enshrined in these treaties is lacking, in particular the WIPO Internet Treaties. Since Russia became a member of the WTO (and thus a TRIPS signatory) only in 2012, it has not concluded any FTA with substantial IP provisions subsequent to WTO/TRIPS accession.

157

Singapore Scores Indicator Patents, Related Rights, and Limitations 1. Patent term of protection 2. Patentability requirements 3. Patentability of computer-implemented inventions 4. Pharmaceutical-related patent enforcement and resolution mechanism 5. Legislative criteria and use of compulsory licensing of patented products and technologies 6. Patent term restoration for pharmaceutical products 7. Regulatory data protection term Total Score—Patents Copyrights, Related Rights, and Limitations 8. Copyright (and related rights) term of protection 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) 10. Availability of frameworks that promote cooperative action against online piracy 11. Scope of limitations and exceptions to copyrights and related rights 12. Digital rights management legislation 13. Clear implementation of policies requiring proprietary software used on government ICT systems to be licensed software Total Score—Copyrights Trademarks, Related Rights, and Limitations 14. Trademarks term of protection (renewal periods) 15. Nondiscrimination/nonrestrictions on the use of brands in packaging of different products 16. Ability of trademark owners to protect their trademarks: requisites for protection 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks 18. Availability of frameworks that promote action against online sale of counterfeit goods Total Score—Trademarks Trade Secrets and Market Access 19. Protection of trade secrets 20. Barriers to market access Total Score—Trade Secrets and Market Access Enforcement 21. Physical counterfeiting rates

Score

Total Possible Score

1 1 1 1 1 1 0.5 6.5

7

0.7494 0.75 1 1 0.75 1 5.24

6

1 1 1 0.75 0.25 4

5

1 1 2

2

0.7195

94

Calculated as the minimum term (70 years), divided by the baseline term of 95 years. Calculated based on the Global Measure of Physical Counterfeiting, where Russia ranked 27 out of 38 economies mapped. 95

158

22. Software piracy rates 23. Civil and procedural remedies 24. Preestablished damages and/or mechanisms for determining the amount of damages generated by infringement 25. Criminal standards including minimum imprisonment and minimum fines 26. Effective border measures Total Score—Enforcement Membership and Ratification of International Treaties 27. WIPO Internet Treaties 28. Singapore Treaty on the Law of Trademarks 29. Patent Law Treaty 30. At least one free trade agreement with substantive and/or specific IP provisions such as chapters on IP and separate provisions on IP rights provided it was signed after WTO/TRIPS membership Total Score—Treaties Total Overall Score

0.6896 1 1 0.75 0.75 4.89

6

1 1 0 1 3 25.63

4 30

Strengths and Weaknesses Key Areas of Strength  Advanced national IP framework in place  Life sciences IP rights in place and available  Patent-enforcement legal framework adequate and generally applied  Copyright framework strengthened over the past few years  Legal framework provides for protection of unregistered marks  Ex officio authority in place for customs officials

Key Areas of Weakness  Although declining, still relatively high rates of software piracy as surveyed by the BSA 2014  Limits on ex officio powers with regard to in-transit seizure

Spotlight on the National IP Environment Past Editions versus Current Scores Singapore’s overall score has increased to 25.63 from a score of 25.38 in the previous edition of the Index. As a percentage, the score remains the same at 85% of the total possible score. The increase in score is a result of the replacement of the GTRIC-e measure of physical counterfeiting with the Global Physical Counterfeiting Measure. Copyrights, Related Rights, and Limitations 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking): As noted in previous editions of the Index, in 2014 Singapore passed amendments to its Copyright Act that strengthened rights holders’ recourse 96

Based on software piracy rates (32%) compiled by the BSA.

159

mechanisms against online piracy. Singapore has for many years faced the challenge of relatively high levels of illegal downloading. The amendments to the Copyright Act provide rights holders with an avenue to apply directly to the High Court for an injunction “requiring the network service provider to take reasonable steps to disable access to the flagrantly infringing online location.” Although it is still early to discern a long-term trend, a number of indicators suggest that online piracy in Singapore has fallen in the past year. For example, 2015 industry reports on music sales show that after four consecutive years of falls, the music market in Singapore grew by close to 5%. Increased sales of digital music and streaming services were drivers of this growth. Still, challenges remain. The latest biennial IP perceptions survey conducted by the Intellectual Property Office of Singapore showed that while the vast majority (over 80%) of those surveyed agreed with the importance of protecting IP rights and creators’ rights, only one in two viewed illegal downloading and file-sharing as a form of theft—down from over 75% in 2010. Trademarks, Related Rights, and Limitations 15. Nondiscrimination/nonrestrictions on the use of brands in packaging of different products: In early 2015, as part of the annual government budget, the Ministry of Health announced it would hold a public consultation on the introduction of standardized or plain packaging for tobacco products. While the consultation document outlined proposed enhanced restrictions on point-of-sale advertising, no proposals for standardized or plain packaging were included. At the time of research, no consultation on the introduction of standardized packaging had taken place. The introduction of such a measure applied to any industry would significantly restrict the use of brands, trademarks, and trade dress on retail packaging, undermining the benefits of trademarks to businesses and consumers alike, and setting a negative precedent for IP policy. It would also decrease Singapore’s score in this indicator from 1 to 0. Enforcement 26. Effective border measures: Singapore Customs maintained enforcement efforts against counterfeit and contraband goods during the course of 2015. A number of successful seizures of trademark-infringing goods and illegal tobacco were publicized by the authorities. Under the Trade Marks Act, Trade Marks (Border Enforcement Measures) Rules, and Copyright Act, Singapore’s border officials have the right to ex officio action against suspected goods. However, this power is limited to goods bound for Singapore or, if in transit, the goods are consigned to a person with a physical or commercial presence in Singapore. Given that Singapore is one of the world’s largest hubs for transshipment, it is likely that a large number of counterfeit goods pass through Singapore’s ports largely unimpeded. Indeed, in the 2015 Situation Report on Counterfeiting in the EU coauthored by Europol and the Office for Harmonization in the Internal Market, Singapore was cited as one of five main transit hubs for counterfeit goods entering the EU. Membership and Ratification of International Treaties Singapore is a contracting party to the Singapore Treaty on the Law of Trademarks and the WIPO Internet Treaties. The U.S.-Singapore FTA includes substantial provisions on IP rights. Singapore is a negotiating party to the TPP Agreement. Singapore is not a contracting party to the Patent Law Treaty. 160

South Africa Scores Indicator Patents, Related Rights, and Limitations 1. Patent term of protection 2. Patentability requirements 3. Patentability of computer-implemented inventions 4. Pharmaceutical-related patent enforcement and resolution mechanism 5. Legislative criteria and use of compulsory licensing of patented products and technologies 6. Patent term restoration for pharmaceutical products 7. Regulatory data protection term Total Score—Patents Copyrights, Related Rights, and Limitations 8. Copyright (and related rights) term of protection 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) 10. Availability of frameworks that promote cooperative action against online piracy 11. Scope of limitations and exceptions to copyrights and related rights 12. Digital rights management legislation 13. Clear implementation of policies requiring proprietary software used on government ICT systems to be licensed software Total Score—Copyrights Trademarks, Related Rights, and Limitations 14. Trademarks term of protection (renewal periods) 15. Nondiscrimination/nonrestrictions on the use of brands in packaging of different products 16. Ability of trademark owners to protect their trademarks: requisites for protection 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks 18. Availability of frameworks that promote action against online sale of counterfeit goods Total Score—Trademarks Trade Secrets and Market Access 19. Protection of trade secrets 20. Barriers to market access Total Score—Trade Secrets and Market Access Enforcement

97

Score

Total Possible Score

1 0 0 0 0 0 0 1

7

0.5397 0.5 0.5 0.25 0.5 0.25 2.53

6

1 1 0.5 0.5 0.25 3.25

5

0.5 1 1.5

2

Calculated as the minimum term (50 years), divided by the baseline term of 95 years.

161

21. Physical counterfeiting rates 22. Software piracy rates 23. Civil and procedural remedies 24. Preestablished damages and/or mechanisms for determining the amount of damages generated by infringement 25. Criminal standards including minimum imprisonment and minimum fines 26. Effective border measures Total Score—Enforcement Membership and Ratification of International Treaties 27. WIPO Internet Treaties 28. Singapore Treaty on the Law of Trademarks 29. Patent Law Treaty 30. At least one free trade agreement with substantive and/or specific IP provisions such as chapters on IP and separate provisions on IP rights provided it was signed after WTO/TRIPS membership Total Score—Treaties Total Overall Score

0.5598 0.6699 0.5 0.25 0.5 0.5 2.96

6

0.5 0 0 0 0.5 11.74

4 30

Strengths and Weaknesses Key Areas of Strength  Draft copyright amendments would provide greater clarity on copyright exceptions  Copyright amendments contain strong provisions for the protection of DRM/TPM; correspond to existing ECTA framework but defined within a specific copyright context  Basic IP framework in place

Key Areas of Weakness  Uncertainty over localization requirements and sector-specific National Industrial Participation Programme (NIP)  Weak protection for patents and related rights  Life sciences IP rights not in place  High levels of copyright piracy  High level of counterfeit goods

Spotlight on the National IP Environment Past Editions versus Current Scores South Africa’s overall score has decreased to 11.74 from 11.86 in the previous edition of the Index. As a percentage, the score has remained the same at 39%. The decreased score is a result of the replacement of the GTRIC-e measure of physical counterfeiting with the Global Physical Counterfeiting Measure. Copyrights, Related Rights, and Limitations 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking); 11. Scope of limitations and exceptions to copyrights and related rights; and 12. Digital rights management legislation: As noted in previous 98

Calculated based on the Global Measure of Physical Counterfeiting, where South Africa ranked 21 out of 38 economies mapped. 99 Based on software piracy rates (34%) compiled by the BSA.

162

editions of the Index, the infringement of copyrighted material online is a growing problem in South Africa. A 2015 survey of information technology professionals and frequent Internet users found that 55% of users had accessed pirated content over the past 12 months. As greater numbers of South Africans gain access to the Internet and will be able to access both legal and illegal content, it is vital that copyright laws are appropriately updated to fully and effectively apply and protect rights holders in an online setting. While South Africa does not currently have a comprehensive online copyright framework in place, proposed amendments of the Copyright Act published by the Department of Trade and Industry in July 2015 would strengthen and reinforce important aspects of South Africa’s legal framework including protection for DRM and TPMs as there is no current provision in the existing Copyright Act with regard to DRM or TPMs. Chapter 12 of the Electronic Communications and Transactions Act (ECTA) does contain a number of provisions that could be interpreted as pertaining to TPMs. Specifically, Section 86 prohibits the “production, sale, design, distribution or possession of any device, including a computer program or a component, which is designed primarily to overcome security measures for the protection of data.” The proposed 2015 Copyright Act amendments contain a fairly robust set of draft sections that correspond with those already contained in ECTA and would more clearly link the protection of TPMs to copyright law. In addition, the proposed amendments also introduce a system of “fair use” exceptions to copyright. While there is still a lack of clarity on some elements of the proposed exceptions (especially as they relate to the scope of educational use and a general reproduction clause for noncommercial purposes), these exceptions as defined by Section 12A in the draft legislation by and large incorporate standards that are used and enforced around the world, most notably in the United States. For many years, there has been uncertainty in South Africa on what constitutes infringement of copyright and what is fair reproduction and use. This is particularly the case for the online environment, where local legal analysis suggests that the final judgment in the long-running court case between Moneyweb and Fin24 (two news websites) will help clarify the meaning of fair dealing under existing copyright law. Trademarks, Related Rights, and Limitations 15. Nondiscrimination/nonrestrictions on the use of brands in packaging: As noted in previous editions of this report, the South African Minister of Health announced the government’s intention to introduce plain packaging legislation for tobacco products in 2015. At the time of research, no legislation had yet been introduced. The introduction of such a measure applied to any industry would significantly restrict the use of brands, trademarks, and trade dress on retail packaging, undermining the benefits of trademarks to businesses and consumers alike, and setting a negative precedent for IP policy. Trade Secrets and Market Access 20. Barriers to market access: The South African government has been increasing the number and scope of localization policies in place over the past few years, including both industrial promotion programs as well as performance requirements for government procurement such as ownership transfer and localization. These policies are both general as well as industry and sector specific. For example, South Africa has long-standing local content requirements for certain sectors including broadcasting. Draft regulations published in 2015 by the Independent Communications Authority of 163

South Africa as well as the draft amendments to the Copyright Act would strengthen these requirements, imposing South African content quotas of up to 80% from already existing high levels (40%). Similarly, in 2014 the Department of Science and Technology adopted a new bio-economy strategy document targeting the life sciences sector. A central part of this policy document was to strengthen local research, development, and innovation capabilities with a view to increasing the local manufacture of active pharmaceutical ingredients, vaccines, and biologics. The document sets as a target that by the mid-2020s, 25% of should be replaced by local production. Within public procurement, significant local content requirements have been in place since 2011 for a host of specially designated sectors ranging from automotive (buses), to clothing, set-top boxes pharmaceuticals, and furniture. Content requirements range from 10% to 100% depending on the industry. For example, the threshold for pharmaceuticals is set at 70% of local content in terms of volume for Oral Solid Dosage tenders and 50% in terms of value for Family Planning Tender. More generally, the NIP has been in place since the late 2000s. The NIP provides that foreign suppliers awarded government contracts sign an obligation agreement within a month of signing the contract with the procurement entity, where they commit to economic activities in South Africa. The value of these “offsets commitments” is determined as 30% of the value of the contract won. The South African government plans to develop sector-specific NIP programs, including one for biopharmaceuticals. At the time of research, the details of these programs had not been announced. The manner in which these programs are designed and the extent to which making access to the South African market and public procurement is conditioned on the sharing of technology and IP with domestic entities would potentially result in a score reduction for this indicator. Membership and Ratification of International Treaties South Africa scores low in its participation in and ratification of international treaties, mostly because South Africa is not a contracting party to the Singapore Treaty on the Law of Trademarks or the Patent Law Treaty. South Africa has not concluded a major FTA post-TRIPS membership that includes substantial provisions on IP rights. South Africa is a signatory to but has not ratified the WIPO Internet Treaties.

164

South Korea Scores Indicator Patents, Related Rights, and Limitations 1. Patent term of protection 2. Patentability requirements 3. Patentability of computer-implemented inventions 4. Pharmaceutical-related patent enforcement and resolution mechanism 5. Legislative criteria and use of compulsory licensing of patented products and technologies 6. Patent term restoration for pharmaceutical products 7. Regulatory data protection term Total Score—Patents Copyrights, Related Rights, and Limitations 8. Copyright (and related rights) term of protection 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) 10. Availability of frameworks that promote cooperative action against online piracy 11. Scope of limitations and exceptions to copyrights and related rights 12. Digital rights management legislation 13. Clear implementation of policies requiring proprietary software used on government ICT systems to be licensed software Total Score—Copyrights Trademarks, Related Rights, and Limitations 14. Trademarks term of protection (renewal periods) 15. Nondiscrimination/nonrestrictions on the use of brands in packaging of different products 16. Ability of trademark owners to protect their trademarks: requisites for protection 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks 18. Availability of frameworks that promote action against online sale of counterfeit goods Total Score—Trademarks Trade Secrets and Market Access 19. Protection of trade secrets 20. Barriers to market access Total Score—Trade Secrets and Market Access Enforcement 21. Physical counterfeiting rates

Score

Total Possible Score

1 0.75 1 0.5 1 1 0.6 5.85

7

0.74100 1 1 0.75 1 0.25 4.74

6

1 1 1 0.75 1 4.75

5

0.75 0.5 1.25

2

0.61101

100

Calculated as the minimum term (70 years), divided by the baseline term of 95 years. Calculated based on the Global Measure of Physical Counterfeiting, where South Korea ranked 23 out of 38 economies mapped. 101

165

22. Software piracy rates 23. Civil and procedural remedies 24. Preestablished damages and/or mechanisms for determining the amount of damages generated by infringement 25. Criminal standards including minimum imprisonment and minimum fines 26. Effective border measures Total Score—Enforcement Membership and Ratification of International Treaties 27. WIPO Internet Treaties 28. Singapore Treaty on the Law of Trademarks 29. Patent Law Treaty 30. At least one free trade agreement with substantive and/or specific IP provisions such as chapters on IP and separate provisions on IP rights provided it was signed after WTO/TRIPS membership Total Score—Treaties Total Overall Score

0.62102 0.75 0.75 1 1 4.73

6

1 0 0 1 2 23.32

4 30

Strengths and Weaknesses Key Areas of Strength  Partial fulfillment of U.S. FTA commitments in regard to IP protection of biologics and pharmaceuticals (though gaps remain)  Patentability of CIIs  Fairly strong online copyright regime  Relatively robust legal framework and enforcement of trademark protections  Enforcement environment rapidly progressing

Key Areas of Weakness  Significant negligence toward requirements regarding software licensing in government agencies  Holes in trade secret protection  Standard-setting rules provide for forced sharing of IP  Gaps in application of adequate damages  Membership in key international treaties on patents and trademarks lacking

Spotlight on the National IP Environment Past Editions versus Current Scores South Korea’s overall score has remained largely the same since the previous edition of the Index at 78% of the total possible score (with a score of 23.33 in the 3rd edition and 23.32 in the 4th edition). In 2015, South Korea generally maintained a strong performance, with some steps forward but also some backward. Positive progress included strengthening the patent system by streamlining the submission and processing of foreign-language applications and claims. South Korea’s score for indicator 21, Measuring Physical Trade-Related Counterfeiting, also rose as a result of the replacement of the GTRIC-e measure of physical counterfeiting with the Global Physical Counterfeiting Measure. Steps backward included revisions to South Korea’s rules on “fair use of IPRs,” which, though they include some positive measures that 102

Based on software piracy rates (38%) compiled by the BSA.

166

safeguard against patent trolls and aim to ease the standard-setting processes, nevertheless introduce worrisome provisions that limit the ability of patent holders to exercise their rights effectively. In addition, at least 2 missed opportunities for addressing ongoing challenges occurred in 2015. Amendments to rules that govern pharmaceuticals, though they fulfill some of Korea’s obligations under the KORUS FTA, do so in a somewhat diluted manner and do not address existing challenges and loopholes in the system. Moreover, increasing evidence of unlicensed software across different government agencies was visible in 2015, with little action taken to address it. Patents, Related Rights, and Limitations 2. Patentability requirements: The Patent Act provides for standard patentability requirements, including novelty, inventive step, and industrial applicability, and these principles are typically applied in practice. In addition, patent amendments enacted in 2015 streamline the patenting process and lift aspects of economy-specific red tape, including the ability to file Patent Cooperation Treaty (PCT) applications in English, rather than Korean, and to set the filing date based on the date of PCT application. These amendments raised South Korea’s score for this indicator by 0.25. Nevertheless, challenges exist with regard to requirements for submitting additional materials with the patent application for certain types of inventions. Specifically, with regard to biopharmaceutical patents, Korean patent law and examiners require vast amounts of pharmacological data to be submitted in the original patent application, not, as is the more common international practice, during either patent prosecution or post-grant validity proceedings. 4. Pharmaceutical-related patent enforcement and resolution mechanism: Amendments to the patent linkage system provided for in the Korean Pharmaceutical Affairs Act aimed at satisfying South Korea’s commitments under the Korea-United States FTA (KORUS) were approved in 2015. The amendments clarify that the patent linkage regime—which involves a publicly available patent listing applicable to registered biopharmaceutical products, based on which generic companies are to notify rights holders of any patent directly associated with a generic application— applies to both chemical-based products and biologics. They also introduce a stay on generic sales of nine months in case of an infringement dispute, although potential loopholes regarding a stay, such as initiation of an invalidation action, do exist and may undermine the effectiveness of the mechanism. In addition, the amendments do not address existing challenges with regard to the possibility for the patent list to include descriptions of a claim that were not submitted by the patent holder. Draft amendments to the National Health Insurance Act that could weaken the new system by requiring innovators to provide the government with an offset of profits accrued during the course of the stay should they lose the patent action (without a similar requirement for generic applicants) were not approved at the time of research. Copyrights, Related Rights, and Limitations 13. Clear implementation of policies requiring proprietary software used on government ICT systems to be licensed software: Since 2011, South Korea has instituted government-wide policies that require government agencies and public institutions to use properly licensed software as well as introduce dedicated implementation monitoring on an agency-specific basis. Nevertheless, evidence from 167

2015 suggests that there is wide lack of requirements implementation, with local government agencies and state-run bodies engaging in unlicensed use of software and servers. For instance, the state-run Korea Power Engineering Company has reportedly licensed less than 5% of the software it uses for its control units. There were similar reports in 2015 for the National Policy Agency. These revelations come on top of evidence from previous years indicating that the use of unlicensed software has also existed in other agencies and public services, such as the Ministry of Defense and the education system. Though not occurring across the board, such outright negligence toward the system brings South Korea’s score for this indicator down to 0.25. Trade Secrets and Market Access 19. Protection of trade secrets: The Unfair Competition and Trade Secrets Prevention Act provides fairly standard protection against unauthorized disclosure and use of trade secrets. Relief is afforded in the form of injunctions, damages, and restoration of business reputation. Although the legal framework for trade secret protection is relatively strong, and a number of recent court cases suggest that relief is available for trade secret violations, significant challenges exist surrounding leaks of sensitive commercial information submitted to regulatory authorities and, in some cases, subsequent industrial espionage. These challenges reportedly affect a range of sectors, including chemicals, cosmetics, and food products. 20. Barriers to market access: In late 2014, amendments to the Guidelines for Review of Unreasonable Exercise of Intellectual Property Rights came into force, which, while introducing some positive limits on abuse of IP rights by “nonpracticing entities” in relation to competition issues, also include provisions that restrict the ability of patent holders to exercise their IP rights effectively, particularly for technologies that have become widely used and may be applied in standard settings. Specifically, the revised guidelines expand the definition of a standard essential patent (SEP) to include technologies that have de facto become standards, including where the patent holder is not aware or involved in the process. The guidelines also impose somewhat ambiguous requirements and conditions under which such SEPs must be licensed to interested parties. This represents potential for forced IP sharing, and as such a serious intrusion into the ability of rights holders—both international and local leading innovators—to utilize their IP rights. It may also influence other economies to apply a similar, overly broad approach to understanding so-called fair use of IP rights. Membership and Ratification of International Treaties South Korea scores low in its participation in and ratification of international treaties, mostly because it is not a contracting party to the Patent Law Treaty or the Singapore Treaty on the Law of Trademarks. South Korea has acceded to the WIPO Internet Treaties. It concluded the KORUS, which was enacted in 2012 and includes substantial provisions on IP rights (Chapter 18 of the agreement).

168

Sweden Scores Indicator Patents, Related Rights, and Limitations 1. Patent term of protection 2. Patentability requirements 3. Patentability of computer-implemented inventions 4. Pharmaceutical-related patent enforcement and resolution mechanism 5. Legislative criteria and use of compulsory licensing of patented products and technologies 6. Patent term restoration for pharmaceutical products 7. Regulatory data protection term Total Score—Patents Copyrights, Related Rights, and Limitations 8. Copyright (and related rights) term of protection 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) 10. Availability of frameworks that promote cooperative action against online piracy 11. Scope of limitations and exceptions to copyrights and related rights 12. Digital rights management legislation 13. Clear implementation of policies requiring proprietary software used on government ICT systems to be licensed software Total Score—Copyrights Trademarks, Related Rights, and Limitations 14. Trademarks term of protection (renewal periods) 15. Nondiscrimination/nonrestrictions on the use of brands in packaging of different products 16. Ability of trademark owners to protect their trademarks: requisites for protection 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks 18. Availability of frameworks that promote action against online sale of counterfeit goods Total Score—Trademarks Trade Secrets and Market Access 19. Protection of trade secrets 20. Barriers to market access Total Score—Trade Secrets and Market Access Enforcement

Total Possible Score

Score 1 1 1 0.5 1 1 1 6.5

7

0.6103 0.5 0.5 1 1 1 4.6

6

1 1 1 1 0.5 4.5

5

1 1 2

2

103

Calculated as the average of the minimum terms of protection for authors (70 years), and performer’s rights and phonographic recordings (50 years), divided by the baseline term of 95 years.

169

21. Physical counterfeiting rates 22. Software piracy rates 23. Civil and procedural remedies 24. Preestablished damages and/or mechanisms for determining the amount of damages generated by infringement 25. Criminal standards including minimum imprisonment and minimum fines 26. Effective border measures Total Score—Enforcement Membership and Ratification of International Treaties 27. WIPO Internet Treaties 28. Singapore Treaty on the Law of Trademarks 29. Patent Law Treaty 30. At least one free trade agreement with substantive and/or specific IP provisions such as chapters on IP and separate provisions on IP rights provided it was signed after WTO/TRIPS membership Total Score—Treaties Total Overall Score

1104 0.77105 0.75 1 1 1 5.52

6

1 1 1 1 4 27.12

4 30

Strengths and Weaknesses Key Areas of Strength  Advanced national IP environment  Life science IP rights in place  Strong enforcement and guidelines on use of licensed software in government agencies  Improved enforcement activities against copyright infringement

Key Areas of Weakness  Lack of clarity in legal framework with regard to online copyright infringement  Limited cooperation and disabling of access to infringing materials by ISPs

Spotlight on the National IP Environment Copyrights, Related Rights, and Limitations 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) and 10. Availability of frameworks that promote action against online piracy: The protection of copyrighted material online has long been a serious challenge for rights holders in Sweden. Levels of piracy have traditionally been high. In 2005, industry estimates suggested half of all computer videogames were pirated. More recent surveys suggest that while the situation has improved, compared with other Nordic economies, Sweden still has high levels of online copyright infringement. A 2015 report by Boston Consulting Group (Svensk Filmnäring, Utveckling, utmaningar och möjligheter 2015) for the Swedish content industry (Film & TV-branschens samarbetskommitté) found that an estimated 29% to 32% of the population accessed illegal television and/or film every month. The rate in 104

Calculated based on the Global Measure of Physical Counterfeiting, where Sweden ranked 38 out of 38 economies mapped. 105 Based on software piracy rates (23%) compiled by the BSA.

170

neighboring Norway, Denmark, and Finland was significantly lower at 19%, 12%, and 8%, respectively. Sweden has also become known as a host for websites that provide access to illegal content. Most notably, Pirate Bay was founded in Sweden in 2003 and originally hosted in Sweden. Yet over the past few years, the Swedish authorities and government have begun to take more forceful action. Since 2008, the Pirate Bay website and its founders have been arrested, successfully prosecuted, and sentenced. In 2015, the Swedish government took over ownership of all Swedish domain names related to the website. More broadly, recent enforcement action has also been taken against other Swedish sites including Swefilmer. Industry estimates suggest Swefilmer was the largest provider of pirated streaming services in Sweden. In July 2015, Swefilmer’s premises were raided by the police and the site was subsequently shut down. The Swedish legal framework has also been strengthened. While Sweden has traditionally had in place a relatively sophisticated copyright regime with rights generally protected, this legal framework has been complemented with online-specific legislation. In 2009, the Intellectual Property Rights Enforcement Directive (IPRED) was introduced. The law (which implements an EU Directive) gave rights holders the opportunity through a court to acquire the contact details of a suspected copyright infringer. Like the introduction of the HADOPI measures in France, research on the effects of the IPRED law in Sweden suggest quite strongly that it had a positive and significant effect on short- to medium-term music sales. A study by Swedish economists suggests that, overall, music sales increased by over 35% after the introduction of the law. With regard to ISP responsibilities, a potential precedent-setting court case between content creators and providers (the group includes Universal Music, Sony Music, Warner Music, Nordisk Film, and Svensk Filmindustri) and one of the largest ISPs in Sweden, Bredbandsbolaget, could set a judicial precedent for ISP liability and responsibility. The basis of the legal action taken by rights holders is the refusal by Bredbandsbolaget and others to block or disable access to allegedly copyright-infringing materials. In its public statements, Bredbandsbolaget has said that ISPs should not be held responsible for the content distributed or transported over its network. At the time of research, no judgment had been reached. In response to the case and the ongoing discussion on the protection of copyright online, the Swedish Minister for Culture and Democracy stated in September that further government action was needed. The minister emphasized the necessity and value of strong copyright protection as a critical enabler of creativity. 13. Clear implementation of policies requiring proprietary software used on government ICT systems to be licensed software: The Swedish government has in place clear and strict guidelines with regard to ICT procurement, including software. Kammarkollegiet’s (the government procurement agency) procurement guidelines for proprietary software (Särskilda villkor för proprietär programvara, Programvaror och tjänster 2014 Grundläggande IT) include relevant limitations on duplication and unlicensed use of any purchased software. Furthermore, the guidelines also include provisions for license auditing. The Swedish government actively audits and inspects agency and departmental use of proprietary software. The Swedish Agency for Public Management (Statskontoret) has performed multiple surveys of public bodies licensing regime. The latest survey from 2007 found that while considerably improved from an earlier 2000 survey, the public bodies surveyed still had major gaps in their licensing regimes, particularly with regard to collecting and maintaining license records. The survey also included clear draft guidelines on standards of 171

licensing regimes applicable to all public bodies. Following the publication of these findings, an extensive public-private sector educational campaign was launched (led by the Business Software Alliance) in 2008 that reached out to all relevant public bodies. Current published internal guidelines and procedures suggests many public bodies have strengthened their licensing practices. This includes even noncentral government public bodies such as universities. Trademarks, Related Rights, and Limitations 15. Nondiscrimination/nonrestrictions on the use of brands in packaging: In February 2015, the Swedish government announced that it was investigating the possibility of implementing plain packaging for tobacco products and would be analyzing whether such measure is compatible with the Swedish Constitution. At the time of research, the results of the government’s investigation were not available. The introduction of such a measure applied to any industry would significantly restrict the use of brands, trademarks, and trade dress on retail packaging, undermining the benefits of trademarks to businesses and consumers alike, and setting a negative precedent for intellectual property policy. The passage of such legislation would decrease Sweden’s score in this indicator from 1 to 0. Membership and Ratification of International Treaties Sweden has signed and acceded to all the international treaties included in the Index. Furthermore, the EU has concluded and ratified several FTAs with substantive IP provisions, such as the EU-Korea Trade Agreement of 2010. The EU has agreed in principle on a major trade agreement with Canada and is in negotiations with the United States on a trade agreement.

172

Switzerland Scores Indicator Patents, Related Rights, and Limitations 1. Patent term of protection 2. Patentability requirements 3. Patentability of computer-implemented inventions 4. Pharmaceutical-related patent enforcement and resolution mechanism 5. Legislative criteria and use of compulsory licensing of patented products and technologies 6. Patent term restoration for pharmaceutical products 7. Regulatory data protection term Total Score—Patents Copyrights, Related Rights, and Limitations 8. Copyright (and related rights) term of protection 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) 10. Availability of frameworks that promote cooperative action against online piracy 11. Scope of limitations and exceptions to copyrights and related rights 12. Digital rights management legislation 13. Clear implementation of policies requiring proprietary software used on government ICT systems to be licensed software Total Score—Copyrights Trademarks, Related Rights, and Limitations 14. Trademarks term of protection (renewal periods) 15. Nondiscrimination/nonrestrictions on the use of brands in packaging of different products 16. Ability of trademark owners to protect their trademarks: requisites for protection 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks 18. Availability of frameworks that promote action against online sale of counterfeit goods Total Score—Trademarks Trade Secrets and Market Access 19. Protection of trade secrets 20. Barriers to market access Total Score—Trade Secrets and Market Access Enforcement

Score

Total Possible Score

1 1 1 0.5 1 1 1 6.5

7

0.63106 0.25 0.5 0.25 0.5 1 3.13

6

1 1 1 1 0.5 4.5

5

1 1 2

2

106

Calculated as the average of the minimum terms of protection for computer programs (50 years) and all other works (70 years), divided by the baseline term of 95 years.

173

21. Physical counterfeiting rates 22. Software piracy rates 23. Civil and procedural remedies 24. Preestablished damages and/or mechanisms for determining the amount of damages generated by infringement 25. Criminal standards including minimum imprisonment and minimum fines 26. Effective border measures Total Score—Enforcement Membership and Ratification of International Treaties 27. WIPO Internet Treaties 28. Singapore Treaty on the Law of Trademarks 29. Patent Law Treaty 30. At least one free trade agreement with substantive and/or specific IP provisions such as chapters on IP and separate provisions on IP rights provided it was signed after WTO/TRIPS membership Total Score—Treaties Total Overall Score

0.76107 0.76108 0.75 0.75 0.75 1 4.77

6

1 1 1 1 4 24.90

4 30

Strengths and Weaknesses Key Areas of Strength  Advanced national IP environment  Application of patent requirements  Life science IP rights in place  Nondiscrimination/nonrestriction on the use of brands in packaging  Strong protection for trademarks

Key Areas of Weakness  Overly broad interpretation of limitations and exceptions for copyright  Crucial gap in enforcement and prosecution of online copyright infringement

Spotlight on the National IP Environment Past Editions versus Current Scores Switzerland’s overall score has increased from 24.76 in the previous edition of the Index to 24.90. As a percentage, the score has remained the same at 83% of the maximum available score. The increased score is a result of the replacement of the GTRIC-e measure of physical counterfeiting with the Global Physical Counterfeiting Measure. Patents, Related Rights, and Limitations Although not measured as part of the Index, Switzerland introduced a host of proposed tax reforms in 2015 that are expected to have a positive impact on its national IP environment. These reforms are similar to ones introduced in recent years in the United Kingdom to incentivize innovation, creation of IP, and the commercial use of IP. Specifically, these proposals would seek to create a “patent box” and introduce new tax incentives at the cantonal (provincial) level. Like the recent tax reforms in the United Kingdom, the proposed legislation follows the guidelines and 107

Calculated based on the Global Measure of Physical Counterfeiting, where Switzerland ranked 29 out of 38 economies mapped. 108 Based on software piracy rates (24%) compiled by the BSA.

174

best practices agreed through the OECD and Base Erosion and Profit Shifting relating to IP, with the tax benefits based on the principle of substantial activity. Initial local tax analysis suggests that the proposed reforms would provide a maximum effective tax relief of about 90%. These proposed reforms would increase the incentives for innovation and improve Switzerland’s already strong national IP environment as it relates to patents, related rights, and limitations. Copyrights, Related Rights, and Limitations 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking): As noted in previous editions of the Index, the copyright regime in Switzerland—particularly with regard to online piracy—is weaker than Switzerland’s otherwise world-class national IP environment. There are legislative weaknesses as well as concerns over a lack of enforcement. While there are some examples of cases where rights holders have successfully been able to defend their rights, overall the enforcement environment remains difficult. For example, while a 2014 judgment in the Zurich Canton High Court (Obergericht Zürich, case UE130087) on illegal filesharing did recommend the prosecution of the alleged infringing activity, the case also stated that the monitoring of the activity of the alleged infringer was a violation of the individual’s data privacy. In this respect, it remains unclear the extent to which information can be collected and the manner in which rights holders can protect their content through, for example, the issuing of warning letters. The Swiss government has long recognized this broader problem and in 2014 announced an ambitious reform plan following the recommendations by the Swiss Working Group on Copyright. The Swiss Federal Department of Justice and Police (Eidgenössische Justiz- und Polizeidepartement) is currently working on relevant amendments to the copyright law, with the draft law set to be finalized by the end of 2015. At the time of research, no draft amendments had been published or released to the public. However, following a meeting with U.S. Attorney General Loretta Lynch in September 2015, the head of the Swiss Federal Department of Justice, Simonetta Sommaruga, released a statement noting the good progress being made on the draft amendments and also reiterating that these new amendments would seek to “facilitate the prosecution of copyright violations on the internet.” Membership and Ratification of International Treaties Switzerland has signed and acceded to all the international treaties included in the Index. Furthermore, as a member of the European Free Trade Association (EFTA) and European Economic Area (EEA), Switzerland has acceded to Annex XVII of the EEA Agreement, which includes substantive provisions on IP that in large part mirror EU standards. Neither Switzerland nor EFTA are parties to the current negotiations for a Transatlantic Trade and Investment Partnership between the United States and EU.

175

Taiwan Scores Indicator Patents, Related Rights, and Limitations 1. Patent term of protection 2. Patentability requirements 3. Patentability of computer-implemented inventions 4. Pharmaceutical-related patent enforcement and resolution mechanism 5. Legislative criteria and use of compulsory licensing of patented products and technologies 6. Patent term restoration for pharmaceutical products 7. Regulatory data protection term Total Score—Patents Copyrights, Related Rights, and Limitations 8. Copyright (and related rights) term of protection 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) 10. Availability of frameworks that promote cooperative action against online piracy 11. Scope of limitations and exceptions to copyrights and related rights 12. Digital rights management legislation 13. Clear implementation of policies requiring proprietary software used on government ICT systems to be licensed software Total Score—Copyrights Trademarks, Related Rights, and Limitations 14. Trademarks term of protection (renewal periods) 15. Nondiscrimination/nonrestrictions on the use of brands in packaging of different products 16. Ability of trademark owners to protect their trademarks: requisites for protection 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks 18. Availability of frameworks that promote action against online sale of counterfeit goods Total Score—Trademarks Trade Secrets and Market Access 19. Protection of trade secrets 20. Barriers to market access Total Score—Trade Secrets and Market Access Enforcement 21. Physical counterfeiting rates

Score

Total Possible Score

1 0.5 1 0.25 1 1 0.5 5.25

7

0.53109 0.25 0.25 0.5 0.5 0 2.03

6

1 1 0.5 0.5 0.5 3.5

5

0.5 1 1.5

2

0.39110

109

Calculated as the minimum term (50 years), divided by the baseline term of 95 years. Calculated based on the Global Measure of Physical Counterfeiting, where Taiwan ranked 15 out of 38 economies mapped. 110

176

22. Software piracy rates 23. Civil and procedural remedies 24. Preestablished damages and/or mechanisms for determining the amount of damages generated by infringement 25. Criminal standards including minimum imprisonment and minimum fines 26. Effective border measures Total Score—Enforcement Membership and Ratification of International Treaties 27. WIPO Internet Treaties 28. Singapore Treaty on the Law of Trademarks 29. Patent Law Treaty 30. At least one free trade agreement with substantive and/or specific IP provisions such as chapters on IP and separate provisions on IP rights provided it was signed after WTO/TRIPS membership Total Score—Treaties Total Overall Score

0.62111 0.5 0.25 0.25 0.5 2.51

6

0 0 0 0 0 14.79

4 30

Strengths and Weaknesses Key Areas of Strength  Basic 20-year patent term of protection in place  Significant efforts to speed up patent review process  Basic exclusive rights for copyright in place  Ongoing digital copyright reform  Streamlining of judicial proceedings through new e-filing system

Key Areas of Weakness  CIIs’ patentability very limited  No patent term restoration or effective regulatory data protection  Major holes in digital copyright regime  DRM lacking in practice  High rates of software piracy  Protection for unregistered wellknown marks only partially provided  Weak enforcement environment

Spotlight on the National IP Environment Past Editions versus Current Scores Taiwan’s overall score has remained largely the same since the 3rd edition of the Index at 49% of the total possible score (rising slightly from 14.6 in the 3rd edition to 14.79 in the 4th edition). This slight increase is mainly a result of the replacement of the GTRIC-e measure of physical counterfeiting with the Global Physical Counterfeiting Measure. Also, efforts to decrease patent backlogs made substantial progress in 2015. Generally speaking, however, little movement took place in regard to existing concerns related to patents and copyrights, and some concerning developments occurred in relation to trademarks, particularly unregistered wellknown marks. The planned introduction of an e-filing system for civil and administrative proceedings should help streamline and strengthen the judicial system to some extent, on top of ongoing efforts toward building IP expertise among judicial and administrative authorities, through more is needed. 111

Based on software piracy rates (38%) compiled by the BSA.

177

Patents, Related Rights, and Limitations 2. Patentability requirements: The Patent Law generally adheres to international patentability standards. However, the Pharmaceutical Law (amended in 2007) excludes several different subject matters from patentability, including methods of treatment and new indications, and places significant limitations on patenting biological compounds. On a positive note, Taiwan has committed to cutting down processing time and has entered into a Patent Prosecution Highway agreement with the United States and Japan. In 2015, Taiwan continued to make progress in this area, with the Taiwan Intellectual Property Office (TIPO) further reducing patent processing times. During the first quarter of 2015, the number of pending applications fell by 23% compared to the same quarter in 2014. In addition, time to first action dropped by 26% and time to grant of invention patents fell by about 20%. 3. Patentability of computer-implemented inventions: TIPO grants patents for software and computer-implemented inventions that are linked to a technical process or feature. In general, examiners take into account features that contribute to the technical character of the claims as well as those that interact with technical features for solving technical problems. Copyrights, Related Rights, and Limitations 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) and 10. Availability of frameworks that promote action against online piracy: The Copyright Act provides for many standard exclusive rights, including reproduction and performance. It does not, however, adequately address copyright in the sphere of the Internet. Digital and online piracy remains a major problem in Taiwan. A 2014 survey put online piracy rates at close to 75% despite a fairly widely reported awareness of its illegality and impact. P2P file sharing as well as unlicensed access to non-hosted and foreign-hosted content continue to be very common, and Taiwan lacks a legal basis for addressing such channels. No movement was made on amendments to the Copyright Act mentioned in the previous edition of the Index, including updating copyrights in the digital sphere, nor on specific issues related to set-top-box piracy, unauthorized educational use and clarity vis-à-vis the notice and takedown system. In addition, enforcement against online piracy has been stymied by fewer resources devoted to the IPR Police in 2015, on top of 2014 amendments to the Communication Security and Surveillance Act that appear to restrict actions by the unit in online investigations. Still, in 2015 the IPR Police reported increased activity in certain areas, in particular toward deterring distribution and use of illegal bit-streaming and other software aimed at unauthorized P2P file sharing, as well as greater collaboration with rights holders in identifying infringing sites and users and conducting investigations and raids. 12. Digital rights management legislation: Taiwan’s copyright law protects against circumvention of technological protection mechanisms as well as possessing, distributing, or importing circumvention devices or any unauthorized copy of a work that involves circumvention of electronic information. Nevertheless, several areas of copyright infringement that rely on circumvention of TPMs have become major problems in Taiwan (including media box piracy and use of protected e-books and 178

academic material), suggesting that its circumvention provisions are not being applied in practice. Trademarks, Related Rights, and Limitations 16. Ability of trademark owners to protect their trademarks: requisites for protection; and 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks: Owners of well-known marks face a mixed environment in Taiwan. In terms of unregistered well-known marks, 2015 amendments to the Fair Trade Act significantly weaken the legal basis under this legislation for protection of such marks (though protection is still afforded under the Trademark Act). Specifically, the revised law does not protect against dilution of unregistered well-known marks—protection of unregistered marks is provided only against the same or similar marks, but not against marks that may cause likelihood of confusion. In addition, the amendments weaken the remedies under the law available to unregistered well-known marks by limiting these to civil remedies only (the previous version also provided criminal as well as administrative remedies). Registered well-known marks are protected against dilution and likelihood of confusion, but authorities take a varied approach to determining whether a mark is well known. The Supreme Court, and recently also the IP Court, have taken a more flexible line, considering sufficient grounds to include a high level of fame in foreign markets. For example, in “Facebook” versus “Lovebook” (103-ShienShanSu-98, December 31, 2014), in the matter of whether the Lovebook (local social networking services) mark caused the likelihood of confusion and was registered and used in bad faith (on the basis of intentional plagiarism in the website design and function), the IP Court found in favor of Facebook, despite the fact that the marks themselves are distinct. In “Dior” versus “D&R” (103-ShienShanSu-113, January 15, 2015), using a similar analysis, the IP Court also found in favor of the famous mark and found a cause of likelihood of confusion. In contrast, TIPO continues to overlook likelihood of confusion cases and requires a high level of fame in Taiwan and beyond the target sector for a mark to qualify for well-known mark protection. Enforcement 23. Civil and procedural remedies; 24. Preestablished damages and/or mechanisms for determining the amount of damages generated by infringement; and 25. Criminal standards including minimum imprisonment and minimum fines: Taiwanese law provides for fairly standard civil remedies and criminal penalties for IP rights infringement. However, the administrative and judicial system is sluggish, with cases facing significant delays (the average time frame for a firstinstance case is close to eight months), and cases are often suspended indefinitely. These delays are partly due to a lack of expertise (despite the establishment of a specialized IP court in 2008). Challenges also exist with regard to evidence discovery and preservation, which is particularly problematic given that heavy evidence requirements are often imposed. Sufficient damages are typically difficult to secure, particularly for small consignments (500 articles or less). Proposed amendments to the copyright law would enhance penalties for online and physical goods copyright infringement. Also on a positive note, the Judicial Yan introduced a new e-filing system for civil and administrative proceedings that is expected to streamline the judicial system and speed up proceedings.

179

Membership and Ratification of International Treaties Taiwan scores a 0 for its participation in and ratification of international treaties. Taiwan is not a contracting party to the WIPO Internet Treaties, the Singapore Treaty on the Law of Trademarks, or the Patent Law Treaty. It should be noted that Taiwan’s political status limits its ability to participate in international treaties. In addition, Taiwan has not signed any post-TRIPS FTA that includes substantial provisions on IP rights.

180

Thailand Scores Indicator Patents, Related Rights, and Limitations 1. Patent term of protection 2. Patentability requirements 3. Patentability of computer-implemented inventions 4. Pharmaceutical-related patent enforcement and resolution mechanism 5. Legislative criteria and use of compulsory licensing of patented products and technologies 6. Patent term restoration for pharmaceutical products 7. Regulatory data protection term Total Score—Patents Copyrights, Related Rights, and Limitations 8. Copyright (and related rights) term of protection 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) 10. Availability of frameworks that promote cooperative action against online piracy 11. Scope of limitations and exceptions to copyrights and related rights 12. Digital rights management legislation 13. Clear implementation of policies requiring proprietary software used on government ICT systems to be licensed software Total Score—Copyrights Trademarks, Related Rights, and Limitations 14. Trademarks term of protection (renewal periods) 15. Nondiscrimination/nonrestrictions on the use of brands in packaging of different products 16. Ability of trademark owners to protect their trademarks: requisites for protection 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks 18. Availability of frameworks that promote action against online sale of counterfeit goods Total Score—Trademarks Trade Secrets and Market Access 19. Protection of trade secrets 20. Barriers to market access Total Score—Trade Secrets and Market Access Enforcement 21. Physical counterfeiting rates

Score

Total Possible Score

1 0.25 0.25 0 0 0 0 1.5

7

0.53112 0.25 0 0.25 0.25 0.5 1.78

6

1 1 0.25 0.25 0.25 2.75

5

0.25 0 0.25

2

0.08113

112

Calculated as the minimum term (50 years), divided by the baseline term of 95 years. Calculated based on the Global Measure of Physical Counterfeiting, where Thailand ranked 3 out of 38 economies mapped. 113

181

22. Software piracy rates 23. Civil and procedural remedies 24. Preestablished damages and/or mechanisms for determining the amount of damages generated by infringement 25. Criminal standards including minimum imprisonment and minimum fines 26. Effective border measures Total Score—Enforcement Membership and Ratification of International Treaties 27. WIPO Internet Treaties 28. Singapore Treaty on the Law of Trademarks 29. Patent Law Treaty 30. At least one free trade agreement with substantive and/or specific IP provisions such as chapters on IP and separate provisions on IP rights provided it was signed after WTO/TRIPS membership Total Score—Treaties Total Overall Score

0.29114 0.25 0 0.25 0.25 1.12

6

0 0 0 0 0 7.4

4 30

Strengths and Weaknesses Key Areas of Strength  Basic patentability framework  Basic exclusive rights in place for copyright  Partial protection against TPM circumvention (though with important remaining gaps)  Administrative notice and takedown mechanism for sale of counterfeit goods recently introduced  Elemental legal framework for enforcement of IP rights

Key Areas of Weakness  Holes in patentability  History of compulsory licenses violating TRIPS  Ineffective regulation of RDP  New copyright regime remains fragmented and incomplete  Limited framework for legal rights of trademarks  Very high physical counterfeiting rates  IP rights enforcement lacking in terms of delays and effective action  New loopholes diluting customs enforcement

Spotlight on the National IP Environment Past Editions versus Current Scores Thailand’s overall score has risen slightly from 24% of the total possible score (with a score of 7.1) in the 3rd edition of the Index to 25% in the 4th edition (with a score of 7.4). The rise in score is mainly due to improvements to the copyright regime, particularly in relation to protection against circumvention of TPMs. Nevertheless, despite a great deal of legislative activity in the area of copyrights and customs, among other areas, overall 2015 represented a year of missed opportunities and, in some instances, concerning developments. Thailand’s overall score could have risen much more had the measures, particularly copyright amendments, been more 114

Based on software piracy rates (71%) compiled by the BSA.

182

complete and in line with international standards. Instead, in certain areas the system is arguably weaker than before or diluted. For instance, in the area of customs enforcement, ex officio authority is not entirely clear based on the new Customs Act, and ISP liability is restricted to notices based on court or ministerial order in at least 2 new laws. In addition, police and judicial efforts against IP infringement continued to be limited in several areas, major backlogs persist in the Department of IP (DIP) and in the courts, and patent issues identified in previous editions of the Index were left unresolved in 2015. Patents, Related Rights, and Limitations 2. Patentability requirements: As noted in last year’s edition of the Index, an invention will be granted patent protection if it is new, involves an inventive step, and has industrial application. The patent law provides specifically that novelty will be destroyed only by an invention widely known or used in the domestic area prior to patent application filing. The law further provides for a standard of worldwide novelty; however, Thailand lacks the level of high technology needed to apply this standard and, as such, it is unclear how effective the consideration of international prior art is in Thailand. Thailand is not bound to the national treatment principle, which allows it to waive the inventive step requirement for Thai citizens (small or local competitors) but enforce it against foreign competitors. Patent examination guidelines released in late 2013 appear to limit patentability of medical use claims and of new uses for known substances. In addition, although the guidelines were reportedly intended to streamline the patent examination process and help reduce severe patent backlogs, thus far the guidelines have resulted in further delays and requests for additional information from patent applicants, particularly for applications related to second medical use. As of December 2014, the backlog had reached over 20,000. Copyrights, Related Rights, and Limitations 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking); 10. Availability of frameworks that promote action against online piracy; and 11. Scope of limitations and exceptions to copyrights and related rights: Two bills amending the Copyright Act BE 2537 (1994) were published in the Official Gazette in 2015 (after being passed by the National Legislative Assembly and signed by the King), and enacted in April 2015. The laws introduce several important measures that seek to close loopholes in Thai copyright law; however, in several instances they are missing key language or provisions that would allow them to effectively limit infringing activities, particularly in the online sphere. Sections 28/1 and 69/1 make camcording in public venues an infringement, although the language is not as strong as that in other economies—only actual reproduction is criminalized without specifically including intent to copy and distribute, essentially precluding preventative enforcement. No landlord liability was introduced, which means that physical shops selling pirated goods are not held liable as intermediaries. The amendments introduce liability for ISPs and a kind of notice and takedown system but with several limitations that render the new law significantly less effective than anticipated and not a true notice and takedown mechanism. ISPs are not liable for non-hosted material, regardless of if they have knowledge that it is infringing. In addition, rights holders’ notices must be accompanied by a court order for ISPs to be 183

responsible to respond. In addition, the amendments involve a high burden of proof to demonstrate infringing sites. The 2015 amendments to the Computer Crimes Act reinforce these same requirements and as such do not contribute to closing these loopholes. In 2014–15, rights holders reported a good rate of response (90%) from mainstream ISPs (though not for non-hosted content); however, the new rules may jeopardize this trend. In terms of exceptions to copyright, among other exceptions, Section 32/9 of the copyright amendments introduce a wide exception for use by disabled persons that goes beyond the Marrakesh Treaty. Also, negligence continues on the Thai government’s part to book piracy in educational institutions, including in relation to broad interpretations of the disabled person’s exception. In addition, unauthorized access to and retransmission of pay TV and satellite programing as well as unlicensed public performance of copyrighted works (e.g., at entertainment venues) remain major challenges on the ground. 12. Digital rights management legislation: The copyright amendments introduce the concept of TPMs as well as penalties for circumventing TPMs. However, though they address the act of circumvention, they fall short of Thailand’s obligations in the WIPO copyright treaties because acts of circumvention include only those in which users are aware they are infringing TPMs. In addition, penalties apply only to actual circumvention and do not explicitly cover sales or distribution of circumvention devices. Also, the exceptions appear to be overly broad, without adequate definition about certain educational or public-use exceptions. In parallel, the film and television industry reports a rise in set-top-box piracy, often involving circumvention of TPMs. Trademarks, Related Rights, and Limitations 15. Nondiscrimination/nonrestrictions on the use of brands in packaging: Thailand is currently considering a draft tobacco control law that would allow the introduction of plain packaging for tobacco products. Specifically, the proposed enabling law would allow the Minister of Health to prohibit the use of colors or branding on tobacco products and it also includes a provision stating that regulations issued under the law would not violate IP rights. The introduction of such a measure applied to any industry would significantly restrict the use of brands, trademarks, and trade dress on retail packaging, undermining the benefits of trademarks to businesses and consumers alike, and setting a negative precedent for IP policy. Enforcement 23. Civil and procedural remedies; and 25. Criminal standards including minimum imprisonment and minimum fines: The copyright amendments introduce preliminary injunctions against infringing actions taking place on computer systems (including online). They also introduce punitive damages for intentional infringement aimed at wide public use (not to exceed double the amount of other established damages). Nevertheless, the amendments also dilute rights holders’ ability to control the destruction of pirated goods; instead, the onus is now on courts themselves to initiate an order. The amendments also introduce criminal penalties for camcording of up to 4 years and 800,000 baht (about USD22,000). However, other acts of copyright infringement, including commercial-scale infringement, face relatively nondeterrent penalties—a maximum of 2 years’ imprisonment or 400,000 baht.

184

26. Effective border measures: Customs Act No. 21 BE 2557 (2014), amending the Customs Act BE 2469 (1926), was enacted in March 2015. It explicitly includes imported IP-infringing goods as those that should be checked and detained, if necessary. It also introduces greater clarity on how customs authorities should treat transshipped goods (including goods that transit through Thailand and those that change transport vehicles within Thailand). However, a major loophole appears to exist vis-à-vis transshipped goods since only suspected “illicit” goods in transit are to be seized, and under Thai IP law illicit (or infringing) goods are only those that are imported, not transshipped. Also in 2015, a new recording program was introduced that is intended to streamline and improve the recording of marks with DIP and Customs, and improve subsequent inspections. Nevertheless, it is not clear under the new rules if this means that marks that are not recorded under the new system will be monitored ex officio by Customs, and as such the new system may dilute the ex officio provision in Thai law. Membership and Ratification of International Treaties Thailand scores a 0 for its participation and ratification of international treaties. Thailand is not a contracting party to the WIPO Internet Treaties, the Singapore Treaty on the Law of Trademarks, or the Patent Law Treaty. Although a member of the Australia-New Zealand Free Trade Agreement, Thailand has not signed any postTRIPS FTA that includes substantial provisions on IP rights.

185

Turkey Scores Indicator Patents, Related Rights, and Limitations 1. Patent term of protection 2. Patentability requirements 3. Patentability of computer-implemented inventions 4. Pharmaceutical-related patent enforcement and resolution mechanism 5. Legislative criteria and use of compulsory licensing of patented products and technologies 6. Patent term restoration for pharmaceutical products 7. Regulatory data protection term Total Score—Patents Copyrights, Related Rights, and Limitations 8. Copyright (and related rights) term of protection 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) 10. Availability of frameworks that promote cooperative action against online piracy 11. Scope of limitations and exceptions to copyrights and related rights 12. Digital rights management legislation 13. Clear implementation of policies requiring proprietary software used on government ICT systems to be licensed software Total Score—Copyrights Trademarks, Related Rights, and Limitations 14. Trademarks term of protection (renewal periods) 15. Nondiscrimination/nonrestrictions on the use of brands in packaging of different products 16. Ability of trademark owners to protect their trademarks: requisites for protection 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks 18. Availability of frameworks that promote action against online sale of counterfeit goods Total Score—Trademarks Trade Secrets and Market Access 19. Protection of trade secrets 20. Barriers to market access Total Score—Trade Secrets and Market Access Enforcement

Total Possible Score

Score 1 0.5 0.5 0 1 0 0.6 3.6

7

0.74115 0.25 0 0.25 0.25 0.5 1.99

6

1 0 0.5 0.25 0.25 2

5

0.25 0.25 0.5

2

115

Calculated as the average of the minimum terms of protection (50 years), divided by the baseline term of 95 years.

186

21. Physical counterfeiting rates 22. Software piracy rates 23. Civil and procedural remedies 24. Preeestablished damages and/or mechanisms for determining the amount of damages generated by infringement 25. Criminal standards including minimum imprisonment and minimum fines 26. Effective border measures Total Score—Enforcement Membership and Ratification of International Treaties 27. WIPO Internet Treaties 28. Singapore Treaty on the Law of Trademarks 29. Patent Law Treaty 30. At least one free trade agreement with substantive and/or specific IP provisions such as chapters on IP and separate provisions on IP rights provided it was signed after WTO/TRIPS membership Total Score—Treaties Total Overall Score

0.13116 0.4117 0.25 0.25 0.25 0.5 1.78

6

1 0.5 0.5 0 2 11.87

4 30

Strengths and Weaknesses Key Areas of Strength  Basic patentability framework  Compulsory license framework in line with TRIPS  Policy requiring legal software in government  Protection for unregistered marks and exclusive rights for trademarks exist in the legal framework, with a slight increase in protection on the ground  Basic legal framework for IP rights enforcement  Increase in anticounterfeiting campaigns, especially pharmaceuticals

Key Areas of Weakness  Weak regulatory data protection  No patent term restoration or patent linkage; preliminary injunctions difficult to obtain  Opaque online copyright environment that is awaiting reform  High online piracy rates  Copyright exceptions overly broad, especially in academic sphere  Lack of implementation of policy requiring legal software in government  High physical counterfeiting rates  Major gaps in judicial recourse and border control  Lack of clarity on treatment of goods confiscated by customs officials

Spotlight on the National IP Environment Past Editions versus Current Scores

116

Calculated based on the Global Measure of Physical Counterfeiting, where Turkey ranked 5 out of 38 economies mapped. 117 Based on software piracy rates (60%) compiled by the BSA.

187

Turkey’s overall score has largely remained the same at 40% of the total score (falling slightly from 11.9 in the 3rd edition to 11.87 in the 4th edition). The change in score is mainly a result of the replacement of the GTRIC-e measure of physical counterfeiting with the Global Physical Counterfeiting Measure. Overall, very little change occurred in the IP environment in 2015. Patent and copyright legislation continues to remain at a standstill, with worrisome amendments outweighing positive developments. IP enforcement remains sluggish and unpredictable; for instance, progress in seizures of counterfeits amounts to a drop in the bucket, with estimates of counterfeiting in Turkey continuing to grow. Positive judicial decisions in relation to well-known marks, if they continue to gain traction, may result in an increase in score in future editions of the Index. Patents, Related Rights, and Limitations 2. Patentability requirements: Draft amendments to Decree-Law 551 on the Protection of Patent Rights, mentioned in the previous edition of the Index, remain under discussion in 2015. On the positive side, these amendments would introduce post-grant opposition and the ability to amend a patent after grant decision, which would aid in resolving the high rate of invalidations, and resulting uncertainty, due to the inability to revise patent applications even when opposition proceedings are taking place at the European Patent Office. The amendments would also bring wider substantive examination and seek to reduce bad faith patent filing. On the negative side, previous amendments that would have clearly provided for patentability of biotechnology inventions and second medical use claims for biopharmaceuticals were removed, meaning that the current situation in which lack of clarity on the issue results in a limited interpretation of patentability of these types of claims by some IP Courts is likely to persist. The amendments also continue to include a provision that would limit the ability of the patent applicant to protect against infringement before a patent is granted, providing only for a right of action for compensation. Moreover, the latest version of the draft law confirms, rather than removes, the three-iteration limit on examination proceedings. Altogether, the latest version would introduce greater uncertainty to the process of patenting and enforcement in Turkey, rather than reducing it. At the same time, in 2015 an online system for patent and trademark filing became available (along with reduced filing fees), which is intended to streamline the system and promote innovation (currently, it takes two to five years from filing to granting). Copyrights, Related Rights, and Limitations 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking): The legal framework provides for general exclusive rights, which includes specific legislation applicable to rights for hosting and online content. The framework is directed to liability of service providers and hosting services but lacks an adequate framework for addressing foreign-hosted infringing material as well as repeat offenders. Online piracy is still prevalent and problematic in Turkey. The Business Action to Stop Counterfeiting and Piracy (BASCAP) estimates the size of the pirated and counterfeit market at close to USD11 billion, with unlicensed digital content up to one-tenth of that value and unlicensed software representing half of the value of unlicensed digital content. Also, evidence of rampant book piracy continues to exist, although there was an indication that police were active in 2015, with at least 188

25 raids of warehouses, bookshops, and printing facilities and seizure of over 150,000 pirated copies of books. Trademarks, Related Rights, and Limitations 16. Ability of trademark owners to protect their trademarks: requisites for protection: The environment for protection of well-known marks continues to be mixed in Turkey. Though provided for via unfair competition rules in the Commercial Code, in practice it is very difficult to successfully obtain protection for unregistered well-known marks given that the expense and evidentiary burden of proving a mark is sufficiently well known in Turkey. Nevertheless, instances of well-known marks achieving invalidation in the face of local registered marks, particularly based on a high level of use in other economies and/or proof of bad faith registration on the part of the infringing marks, do exist (for instance, an Istanbul Civil IP Courts of First Instance case in relation to the mark “Oliver Peoples”). Enforcement 21. Physical counterfeiting rates: About 60% of the almost USD11 billion counterfeit and pirated market in Turkey (mentioned above) is estimated to be produced domestically. Given that smuggled goods are a problem of equal scale in Turkey, recent efforts have targeted smuggling. Under the Anti-Smuggling Law, police have ex officio authority to raid suspected production or commercial sites (which is not necessarily available for trademark offenses). Figures vary, but the past few years have seen heightened levels of raids and seizures of smuggled goods, with a large portion of these being counterfeit.

Membership and Ratification of International Treaties Turkey has acceded to the WIPO Internet Treaties. It has signed but has not yet ratified the Patent Law Treaty and the Singapore Treaty on the Law of Trademarks. In addition, Turkey is not party to a post-TRIPS FTA that includes substantial provisions on IP rights.

189

Ukraine Scores Indicator Patents, Related Rights, and Limitations 1. Patent term of protection 2. Patentability requirements 3. Patentability of computer-implemented inventions 4. Pharmaceutical-related patent enforcement and resolution mechanism 5. Legislative criteria and use of compulsory licensing of patented products and technologies 6. Patent term restoration for pharmaceutical products 7. Regulatory data protection term Total Score—Patents Copyrights, Related Rights, and Limitations 8. Copyright (and related rights) term of protection 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) 10. Availability of frameworks that promote cooperative action against online piracy 11. Scope of limitations and exceptions to copyrights and related rights 12. Digital rights management legislation 13. Clear implementation of policies requiring proprietary software used on government ICT systems to be licensed software Total Score—Copyrights Trademarks, Related Rights, and Limitations 14. Trademarks term of protection (renewal periods) 15. Nondiscrimination/nonrestrictions on the use of brands in packaging of different products 16. Ability of trademark owners to protect their trademarks: requisites for protection 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks 18. Availability of frameworks that promote action against online sale of counterfeit goods Total Score—Trademarks Trade Secrets and Market Access 19. Protection of trade secrets 20. Barriers to market access Total Score—Trade Secrets and Market Access Enforcement

Score

Total Possible Score

1 0 0 0 0 1 0.5 2.5

7

0.58118 0.25 0 0.25 0.25 0.25 1.58

6

1 1 0.25 0.25 0 2.5

5

0 0.25 0.25

2

118

Calculated as the average of the minimum terms of protection for anonymous works (70 years), and performer’s rights, phonograms, videograms, and broadcasts (50 years), divided by the baseline term of 95 years.

190

21. Physical counterfeiting rates 22. Software piracy rates 23. Civil and procedural remedies 24. Preestablished damages and/or mechanisms for determining the amount of damages generated by infringement 25. Criminal standards including minimum imprisonment and minimum fines 26. Effective border measures Total Score—Enforcement Membership and Ratification of International Treaties 27. WIPO Internet Treaties 28. Singapore Treaty on the Law of Trademarks 29. Patent Law Treaty 30. At least one free trade agreement with substantive and/or specific IP provisions such as chapters on IP and separate provisions on IP rights provided it was signed after WTO/TRIPS membership Total Score—Treaties Total Overall Score

0.05119 0.17120 0.25 0 0.25 0 0.72

6

1 1 1 1 3 11.55

4 30

Strengths and Weaknesses Key Areas of Strength  Contracting party to all international treaties included in the Index and FTA with substantial IP provisions  Patent term restoration for pharmaceuticals is available  Proposed notice and takedown regime approximating international standards (depending on final version)

Key Areas of Weakness  Weak and ambiguous compulsory licensing framework  Lack of application of regulatory data protection  Broad copyright exceptions applied  Failure to curb government use of illegal software  Little administrative or judicial action against online piracy and counterfeiting  High rates of piracy and counterfeiting  Extremely poor enforcement environment

Spotlight on the National IP Environment Past Editions versus Current Scores Ukraine’s score remains largely the same as in the 3rd edition of the Index, at 39% of the overall score (with a slight fall in score from 11.69 in the 3rd edition to 11.55 in the 4th edition). The change in score is mainly a result of the replacement of the GTRIC-e measure of physical counterfeiting with the Global Physical Counterfeiting Measure. 119

Calculated based on the Global Measure of Physical Counterfeiting, where Ukraine ranked 2 out of 38 economies mapped. 120 Based on software piracy rates (83%) compiled by the BSA.

191

Areas of Note In 2015, the Ukrainian government approved a new Strategy for Sustainable Development “Ukraine 2020,” which includes IP protection and reform as a priority focus. In addition, a number of draft laws are currently under discussion, including as part of fulfilling Ukraine’s obligations under the EU Association Agreement. Also in 2015, greater participation in international and bilateral dialogue on IP occurred, including potential IP reform and issues such as online piracy, border enforcement, and counterfeit medicines and biotech products, but no real concrete changes to the IP framework took place. Nevertheless, given the ongoing political crisis within the economy, any major movement or concrete action on the above steps is likely to be delayed for the time being. Patents, Related Rights, and Limitations 2. Patentability requirements: Draft laws “On Amendments to Certain Legislative Acts of Ukraine (concerning the strengthening of IPR protection)” and “On Amendments to Some Legislative Acts of Ukraine in the Field of Intellectual (Industrial) Property”—part of Ukraine’s fulfilling its obligations within the EU Association Agreement—would introduce, among other elements, a legal basis for post-grant opposition of design patents and legal action. If passed, the measure introduces an indirect form of industrial applicability testing for certain types of patents that has previously been missing from the patent examination process in Ukraine. Nevertheless, they do not appear to address an underlying problem within the patent system―the ability to transform utility models into invention patents without substantive examination―which is increasingly associated with abuse by bad faith actors. According to data released by the State Intellectual Property Office of Ukraine (SIPSU), in the first half of 2015, just above 30% of patent examinations were substantive. In addition, the large majority of “patent” applications (about threefourths) were actually for utility models. Copyrights, Related Rights, and Limitations 10. Availability of frameworks that promote action against online piracy: At present, Ukraine lacks effective action against online piracy, including a notice and takedown mechanism and third-party or intermediary liability. Proposals to address this situation have been put forward. Throughout 2013 and 2014, SIPSU discussed amendments to the Copyright Act that would provide for notice and takedown. The 2014 version of the amendments includes a mechanism for takedown upon rights holder notice and ISP liability for not taking action, punishable by a fine of 500 to 1,000 month’s wages. Multiple consultations with stakeholders and international experts took place in 2015 on the basis of a new version of the amendments introduced that year, and the new version is reportedly under discussion by the Supreme Council of Ukraine, though a final version of the draft had not yet been issued at the time of research. At least one version of the bill in 2015 would dilute certain provisions of the earlier versions, including introducing ambiguous language on third-party/ISP liability and slightly longer ISP response time compared to the 2014 version. Sites hosted in Ukraine continue to appear on the USTR’s annual Notorious Markets list.

192

13. Clear implementation of policies and guidelines requiring that any proprietary software used on government ICT systems should be licensed software: Throughout 2015, SIPSU conducted audits of licensed software use in central government agencies (25 total planned for 2015). As of mid-year, of 5 agencies, the inspection found 2 with 30% to 40% of software unlicensed, and 2 with 95% to 99% unlicensed. In addition, no cross-agency measure has been issued that would aid in resolving licensing gaps, with evidence indicating that this problem is significant across a number of agencies (with some exceptions; for instance, the State Statistics Agency has 100% compliance). Trademarks, Related Rights, and Limitations 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks: Ukraine provides for a basic legal framework that promotes trademark protection. A major gap in the legislation is the lack of clarity in relation to protection of famous trademarks against dilution. Ukraine suffers from rampant counterfeiting, with a wide number of counterfeit products openly sold on the market. In 2015, the situation continued to worsen, particularly in regard to medicines. Evidence exists of serious, large-scale counterfeit drug production in Ukraine. For instance, 2015 seizures of one organization/lab indicate production of 50 different drugs sold online mainly to the European market using a website copied from a legitimate one. Enforcement 26. Effective border measures: The Customs Code provides clear ex officio authority to customs officials, but it is hardly utilized. The legal reference to in-transit detainment is too ambiguous for successful application. Overall, there is a lack of cooperation with rights holders, and customs authorities have made only minor seizures over the past several years. Membership and Ratification of International Treaties Ukraine is a member of all of the treaties covered in the Index and, as such, it scores high in this category. In 2014, as part of the Ukraine-EU Association Agreement, Ukraine signed and ratified an FTA with the EU that includes substantial provisions on IP rights (in Chapter 9). Nevertheless, the actual launch of the FTA portion of the agreement (which is not covered in this indicator) has been postponed until at least early 2016.

193

United Arab Emirates Scores Indicator Patents, Related Rights, and Limitations 1. Patent term of protection 2. Patentability requirements 3. Patentability of computer-implemented inventions 4. Pharmaceutical-related patent enforcement and resolution mechanism 5. Legislative criteria and use of compulsory licensing of patented products and technologies 6. Patent term restoration for pharmaceutical products 7. Regulatory data protection term Total Score—Patents Copyrights, Related Rights, and Limitations 8. Copyright (and related rights) term of protection 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) 10. Availability of frameworks that promote cooperative action against online piracy 11. Scope of limitations and exceptions to copyrights and related rights 12. Digital rights management legislation 13. Clear implementation of policies requiring proprietary software used on government ICT systems to be licensed software Total Score—Copyrights Trademarks, Related Rights, and Limitations 14. Trademarks term of protection (renewal periods) 15. Nondiscrimination/nonrestrictions on the use of brands in packaging of different products 16. Ability of trademark owners to protect their trademarks: requisites for protection 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks 18. Availability of frameworks that promote action against online sale of counterfeit goods Total Score—Trademarks Trade Secrets and Market Access 19. Protection of trade secrets 20. Barriers to market access Total Score—Trade Secrets and Market Access Enforcement

Total Possible Score

Score 1 0.5 0 1 1 0 0 3.5

7

0.53121 0.5 0 0.5 0.25 0.25 2.03

6

1 1 0.25 0.75 0.25 3.25

5

0.5 0 0.5

2

121

Calculated as the average of the minimum terms of protection (50 years), divided by the baseline term of 95 years.

194

21. Physical counterfeiting rates 22. Software piracy rates 23. Civil and procedural remedies 24. Preestablished damages and/or mechanisms for determining the amount of damages generated by infringement 25. Criminal standards including minimum imprisonment and minimum fines 26. Effective border measures Total Score—Enforcement Membership and Ratification of International Treaties 27. WIPO Internet Treaties 28. Singapore Treaty on the Law of Trademarks 29. Patent Law Treaty 30. At least one free trade agreement with substantive and/or specific IP provisions such as chapters on IP and separate provisions on IP rights provided it was signed after WTO/TRIPS membership Total Score—Treaties Total Overall Score

0.26122 0.64123 0.5 0 0.5 0.25 2.15

6

1 0 0 0 1 12.43

4 30

Strengths and Weaknesses Key Areas of Strength  Relatively effective pharmaceutical patent linkage system  Exclusive rights for trademarks are in place  Trade secret regime is improving  Legal framework for enforcement of IP rights is present, with fairly strong application, the key exceptions being digital copyright and counterfeits  Rise in antipiracy initiatives and application of fines and seizures of infringing products  Substantial trademark reform is in the advanced stages

Key Areas of Weakness  Patentability framework lacking, including regarding methods, biologics, CIIs, and patent backlogs  No patent term restoration and regulatory data protection for pharmaceuticals  Rudimentary copyright regime fails to address growing piracy  Lack of collection society framework  Increased availability of circumvention devices  Relatively high levels of software piracy given economic development  Uncertainty on treatment of prior use for trademarks  Gaps in border controls  Ex officio action for IP rights weak and lacking transparency  Not a party to key international treaties on IP protection

122

Calculated based on the Global Measure of Physical Counterfeiting, where UAE ranked 10 out of 38 economies mapped. 123 Based on software piracy rates (36%) compiled by the BSA.

195

Spotlight on the National IP Environment Past Editions versus Current Scores The UAE’s overall score has increased from 39% of the total possible score (with a score of 11.71) in the 3rd edition of the Index to 41% (with a score of 12.43) in the 4th edition. This change is mainly a result of the replacement of the GTRIC-e measure of physical counterfeiting with the Global Physical Counterfeiting Measure and positive movement (including administrative and judicial decisions as well as police action) in the areas of TV piracy and customs actions against counterfeits. Nevertheless, in other areas, the UAE remained stagnant in 2015, including little movement on pending laws that would improve the trademark environment. Patents, Related Rights, and Limitations 2. Patentability requirements: The UAE provides for the standard patentability requirements of novelty, inventive step, and industrial application. However, significant restrictions to patentability remain, including in relation to methods used in business, software, and medical treatment, as well as for biologic products. In addition, the patent examination process is subject to considerable delays, with backlogs particularly for substantive examinations. Copyrights, Related Rights, and Limitations 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking): In 2015, evidence suggests a rise in both private and public sector efforts to deter piracy, with an emphasis on TV piracy. These efforts include educational campaigns by local TV networks, such as the Do the Right Thing initiative launched by local network OSN and supported by the Department of Economic Development (DED), as well as the creation of an Anti-Piracy Coalition involving local and international industry participants. The year 2015 also saw increased raids by the DED (at least about 50), shutdown of unlicensed IPTV portals, confiscation of goods, destruction of set-top boxes, and fines and arrests. For example, the Dubai Courts issued a fine of AED50,000 (close to USD14,000) on a distributor of a foreign IPTV service available in the UAE and confiscated all set-top boxes distributed in association with the dealer. Another shop was fined AED200,000 (about USD55,000) for the sale of unlicensed TV subscriptions and set-top boxes. Nevertheless, the DED estimates that TV piracy still costs the content and broadcaster/satellite providers industry AED1.8 billion (USD500 million) annually in terms of revenue loss and knock-on effects on the wider economy. The prevalence of decoder boxes, VPNs, and other anti-circumvention measures are rising. This is particularly an issue among expat communities, with, for instance, an estimated 50% of Indians living in the Gulf Cooperation Council (GCC) using pirated receivers. Trademarks, Related Rights, and Limitations 16. Ability of trademark owners to protect their trademarks: requisites for protection: In recent years, trademark registration has been on a “first to file” basis, and opposition relying on the concept of prior use of a trademark has not been considered except in certain situations. Enactment of the GCC Trademark Law would provide greater clarity on, and improve, protection afforded to rights holders,

196

particularly of well-known marks; however, no major movement occurred in regard to approving the law in the UAE as of the time of research. Trade Secrets and Market Access 20. Barriers to market access: The UAE has a number of localization requirements in place that involve potential forced IP sharing with local entities. These include a local ownership requirement of 51% or above in order to import products from abroad as well as to participate in government tenders. The Federal Law No. 2 or the Commercial Companies Law of 2015 does not amend the requirement of 51% local ownership for all companies (onshore); the requirement is rather confirmed in the new law. An additional punitive incentive for not becoming a local company (and the know-how sharing that involves) includes a measure within Ministry of Economy Resolution 2/84/4 2015. This measure gives domestic products a 10% price advantage over foreign products in government procurement and requires that domestic products be purchased if their price is the same as or lower than the foreign product (applicable to all tenders by government or public agencies as well as any companies in which the government owns a 51% share or more). The new rules mainly apply to commodities, agriculture, and industrial products. Enforcement 23. Civil and procedural remedies: Implementation of the GCC Trademark Law would allow rights holders to obtain a preliminary injunction against potentially infringing goods on an ex parte basis. This would greatly improve rights holders’ ability to prevent trademark infringement, particularly counterfeit goods trafficking, before it occurs. 25. Criminal standards including minimum imprisonment and minimum fines: The Anti-Commercial Fraud Law would increase penalties for counterfeiting of both registered and unregistered marks, raising the maximum prison sentence from 1 year to 3 years and significantly increasing maximum fines by about 100 times, to close to AED1 million (over USD250,000). Maximum penalties for the deliberate sale of counterfeit goods would increase to 1 year and AED250,000 (close to USD70,000). However, the minimum fine is relatively low at AED50,000, which could arguably be nondeterrent. Under the GCC Trademark Law, repeat infringers receive double penalties. The most recent version of the Anti-Commercial Fraud Law also provides for destruction of counterfeit goods, in contrast to previous drafts that would have allowed counterfeit goods to be reexported to the economy of origin. Finally, the GCC Trademark Law creates a new single anticounterfeiting authority for all of the Emirates. As of the time of research, no major movement on the Anti-Commercial Fraud Law had occurred. 26. Effective border measures: Existing UAE law does not provide for the confiscation of in-transit goods or ex officio action by customs authorities. However, the GCC Trademark Law does include measures that authorize customs officials to take ex officio action against large shipments of goods suspected of infringing trademarks. This authority includes seizure of in-transit goods. In 2015, a landmark decision taken by Dubai Customs set an important precedent in practice vis-à-vis the seizure and treatment of infringing goods. Under the decision, instead of reexporting a large batch of counterfeit cigarettes—which has typically been the approach taken 197

with counterfeit products at UAE borders—the Dubai customs authorities agreed to dispose of them. Nevertheless, much more needs to be done to address the huge problem of counterfeit goods entering and transiting through the UAE, including the above-mentioned improvements to the legal framework; currently, out of the approximately 1 million containers that pass through Jebel Ali, the main port of Dubai, each month, it is estimated that only about 5% to 7% are actually inspected. Membership and Ratification of International Treaties The UAE scores low in its participation in and ratification of international treaties, mostly because the UAE is not a contracting party to the Singapore Treaty on the Law of Trademarks or the Patent Law Treaty. Also, the UAE has not concluded a major FTA post-TRIPS membership that includes substantial provisions on IP rights. The UAE has acceded to the WIPO Internet Treaties.

198

United Kingdom Scores Indicator Patents, Related Rights, and Limitations 1. Patent term of protection 2. Patentability requirements 3. Patentability of computer-implemented inventions 4. Pharmaceutical-related patent enforcement and resolution mechanism 5. Legislative criteria and use of compulsory licensing of patented products and technologies 6. Patent term restoration for pharmaceutical products 7. Regulatory data protection term Total Score—Patents Copyrights, Related Rights, and Limitations 8. Copyright (and related rights) term of protection 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) 10. Availability of frameworks that promote cooperative action against online piracy 11. Scope of limitations and exceptions to copyrights and related rights 12. Digital rights management legislation 13. Clear implementation of policies requiring proprietary software used on government ICT systems to be licensed software Total Score—Copyrights Trademarks, Related Rights, and Limitations 14. Trademarks term of protection (renewal periods) 15. Nondiscrimination/nonrestrictions on the use of brands in packaging of different products 16. Ability of trademark owners to protect their trademarks: requisites for protection 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks 18. Availability of frameworks that promote action against online sale of counterfeit goods Total Score—Trademarks Trade Secrets and Market Access 19. Protection of trade secrets 20. Barriers to market access Total Score—Trade Secrets and Market Access Enforcement

Total Possible Score

Score 1 1 1 0.5 1 1 1 6.5

7

0.63124 1 1 1 1 1 5.63

6

1 0 1 1 0.75 3.75

5

1 1 2

2

124

Calculated as the average of the minimum terms of protection for broadcasts and computergenerated works (50 years), and for literary works, dramatic works, sound recordings, phonograms, films, and music (70 years), divided by the baseline term of 95 years.

199

21. Physical counterfeiting rates 22. Software piracy rates 23. Civil and procedural remedies 24. Preestablished damages and/or mechanisms for determining the amount of damages generated by infringement 25. Criminal standards including minimum imprisonment and minimum fines 26. Effective border measures Total Score—Enforcement Membership and Ratification of International Treaties 27. WIPO Internet Treaties 28. Singapore Treaty on the Law of Trademarks 29. Patent Law Treaty 30. At least one free trade agreement with substantive and/or specific IP provisions such as chapters on IP and separate provisions on IP rights provided it was signed after WTO/TRIPS membership Total Score—Treaties Total Overall Score

0.89125 0.76126 1 1 1 1 5.65

6

1 1 1 1 4 27.53

4 30

Strengths and Weaknesses Key Areas of Strength Key Areas of Weakness  Strong enforcement environment  Plain packaging regulations published highlighted by the work of a specialist and introduced crime unit and cross-industry and  Relatively high level of software government cooperation piracy in comparison to other highincome economies  Highly advanced and sophisticated national IP environment  2015 education and enforcement campaign against online piracy  Commitment to and implementation of international treaties  Consistent, effective, and innovative border protection against counterfeited and pirated goods Spotlight on the National IP Environment Past Editions versus Current Scores The United Kingdom’s overall score has decreased slightly from 27.61 in the previous edition of the Index to 27.53. As a percentage, the score remains the same at 92% of the total possible score. This small change masks some broader movement within the overall score. For example, the score for Category 2: Copyrights, Related Rights, and Limitations has increased as a result of the quashing of the new copyright exceptions introduced last year and the full roll-out of the Creative Content UK initiative. Similarly, the replacement of the GTRIC-e measure of physical counterfeiting with 125

Calculated based on the Global Measure of Physical Counterfeiting, where the United Kingdom ranked 34 out of 38 economies mapped. 126 Based on software piracy rates (24%) compiled by the BSA.

200

the Global Physical Counterfeiting Measure has resulted in an increase in the score for indicator 21. Finally, the introduction of plain packaging for certain products has resulted in a decrease in the score for indicator 15. Overall, the United Kingdom remains one of the highest-rated economies in the Index with a strong national IP environment with particular strengths in the enforcement category. Patents, Related Rights, and Limitations In 2013, the United Kingdom introduced a new “patent box” tax regime with the view of encouraging investment in IP-intensive industries and exploitation of existing IP. This tax break encourages companies in the United Kingdom to commercialize their intellectual property by only being charged a 10% tax rate on any income resulting from that IP. This is a particularly attractive tax incentive to certain sectors (including the life sciences) given the significant investments required for R&D and product development. Evidence suggests that the tax incentives had a positive effect, particularly in the life sciences sector. In the first half of 2014, Britain was the top destination in Europe for early-stage life science investment, drawing GBP738 million from January to June. In addition to promoting early-stage investing, the new tax incentive has also encouraged major industry players to reconsider the United Kingdom as a manufacturing destination. Shortly after the tax break was launched, GSK announced that it would build a GBP350 million manufacturing facility in the country with the potential for further investment of GBP700 million. In announcing the decision, the company specifically cited the United Kingdom’s commitment to improving the overall environment for innovation. As of 2015, following a government review prompted by the need to comply with international standards on Base Erosion and Profit Shifting relating to IP (as established by the OECD), the patent box tax regime is being modified and will, broadly speaking, from June 2016 apply only to the portion of R&D undertaken within the United Kingdom in developing the qualifying IP. At the end of 2015, the U.K. government issued a consultation document seeking comments and stakeholder feedback on the exact format of these modifications and related tax calculations. Copyrights, Related Rights, and Limitations 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking): As discussed in the previous edition of the Index, a number of important policy developments have occurred in the online copyright environment in the United Kingdom over the past few years. The Digital Economy Act, which included significant powers of deterrence and potential denying of Internet access to repeat infringers—was passed in 2010. This program was replaced in 2014 by an industry-led, government-supported voluntary effort between content creators in the United Kingdom (the Motion Picture Association and the British Recorded Music Industry) and the main ISPs (BT, Sky Broadband, TalkTalk, and Virgin Media). Consisting of an extensive government-backed education program and a direct consumer infringement notification system (the Voluntary Copyright Alert Programme), the Creative Content UK initiative was introduced in 2015. Households in the United Kingdom that persistently pirate music and movies online will receive emails warning them that their actions constitute illegal behavior. At the time of research, the education campaign had begun broadcasting television adverts, with full roll-out scheduled to take place during 2016. 201

11. Scope of limitations and exceptions to copyrights and related rights: As noted in the previous edition of the Index, important changes were made to the United Kingdom’s copyright limitations and exceptions in 2014 with, most significantly, a new personal copy exception introduced through the Copyright and Rights in Performances (Personal Copies for Private Use) Regulations 2014. These regulations were enacted October 1, 2014, and would allow consumers to make copies of creative works (except computer software) for private and personal use. In particular, these new exceptions would allow consumers to shift and transfer their content from one format to another. The lack of clarity on format shifting has been a long-standing gray area in U.K. copyright law. Subsequent to being introduced, the regulations were challenged by U.K. rights holders who raised concerns over the lack of an accompanying levy system and form of compensation. Unlike most private copy exceptions (and the majority in place within the EU), no levy system was added to compensate rights holders for the making of these private copies. In July 2015, these regulations were quashed by a High Court ruling following a judicial review. The judge noted the limitations to the evidence to support the government’s claim that the monetary damage to rights holders would be minimal. The quashing of the regulations reversed last year’s drop in score for this indicator. Trademarks, Related Rights, and Limitations 15. Nondiscrimination/nonrestrictions on the use of brands in packaging of different products: In March 2015, the U.K. Parliament approved the Standardised Packaging of Tobacco Products Regulation 2015, standardizing the manner in which tobacco products are to be sold in the United Kingdom, and from May 2016, relevant products will have to be uniform in size, shape, and design, with only the brand name and graphic health-warning images permitted on the front. The application of such a measure to any industry significantly restricts the use of brands, trademarks, and trade dress on retail packaging, undermining the benefits of trademarks to businesses and consumers alike, and setting a negative precedent for IP policy. The introduction of these regulations has resulted in the reduction in score for this indicator from 1 to 0. Enforcement As noted in previous editions of the Index, the United Kingdom has an impressive and well-developed enforcement framework that incorporates government and law enforcement efforts with industry and the private sector. The latest IP Crime Report published by the Intellectual Property Office shows that while counterfeiting and piracy are still a significant challenge to the British economy and to U.K. consumers, cross-industry and government efforts are bearing fruit. For example, the report cites a 7% fall in the number of reported counterfeiting and piracy crimes reported to Crimestoppers (a U.K. charity) as well as a drop in the number of trademark and copyright-related criminal convictions. In particular, there was a notable drop in the number of reports relating to online auction sites and the sale of infringing goods. As noted in previous editions of the Index, since 2013 the United Kingdom has had a specialist IP crime unit within the City of London police department. A major part of this unit’s work is acting against online sales of counterfeit physical goods. In addition, the Intellectual Property Office held a 1-month-long public consultation in July 2015 on increasing criminal penalties for online infringement to 10 years from the current level of 2. This would match existing sanctions for physical good. This has 202

been a long-standing issue in the United Kingdom first highlighted by the 2005/6 Gowers Review of Intellectual Property. The stiffening of sentences for criminal copyright infringement would provide an additional deterrent and further strengthen the United Kingdom’s enforcement environment. Membership and Ratification of International Treaties The United Kingdom has signed and acceded to all of the international treaties included in the Index. Furthermore, the EU has concluded and ratified several FTAs with substantive IP provisions, such as the EU-Korea Trade Agreement of 2010.

203

United States Scores Indicator Patents, Related Rights, and Limitations 1. Patent term of protection 2. Patentability requirements 3. Patentability of computer-implemented inventions 4. Pharmaceutical-related patent enforcement and resolution mechanism 5. Legislative criteria and use of compulsory licensing of patented products and technologies 6. Patent term restoration for pharmaceutical products 7. Regulatory data protection term Total Score—Patents Copyrights, Related Rights, and Limitations 8. Copyright (and related rights) term of protection 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) 10. Availability of frameworks that promote cooperative action against online piracy 11. Scope of limitations and exceptions to copyrights and related rights 12. Digital rights management legislation 13. Clear implementation of policies requiring proprietary software used on government ICT systems to be licensed software Total Score—Copyrights Trademarks, Related Rights, and Limitations 14. Trademarks term of protection (renewal periods) 15. Nondiscrimination/nonrestrictions on the use of brands in packaging of different products 16. Ability of trademark owners to protect their trademarks: requisites for protection 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks 18. Availability of frameworks that promote action against online sale of counterfeit goods Total Score—Trademarks Trade Secrets and Market Access 19. Protection of trade secrets 20. Barriers to market access Total Score—Trade Secrets and Market Access Enforcement 21. Physical counterfeiting rates

Score

Total Possible Score

1 0.75 1 1 1 1 0.75 6.5

7

1127 1 1 1 1 1 6

6

1 1 1 1 0.75 4.75

5

1 1 2

2

0.79128

127

Calculated as the minimum term (95), which is also the baseline term of 95 years. Calculated based on the Global Measure of Physical Counterfeiting, where the United States ranked 30 out of 38 economies mapped. 128

204

22. Software piracy rates 23. Civil and procedural remedies 24. Preestablished damages and/or mechanisms for determining the amount of damages generated by infringement 25. Criminal standards including minimum imprisonment and minimum fines 26. Effective border measures Total Score—Enforcement Membership and Ratification of International Treaties 27. WIPO Internet Treaties 28. Singapore Treaty on the Law of Trademarks 29. Patent Law Treaty 30. At least one free trade agreement with substantive and/or specific IP provisions such as chapters on IP and separate provisions on IP rights provided it was signed after WTO/TRIPS membership Total Score—Treaties Total Overall Score

0.82129 1 1 1 0.75 5.36

6

1 1 1 1 4 28.61

4 30

Strengths and Weaknesses Key Areas of Strength  Pharmaceutical-related patent enforcement and resolution mechanism in place  Court decisions generally set appropriate boundaries on copyright exceptions  DRM legislation in place  Effective protection of trade secrets  Generally deterrent civil remedies and criminal penalties  Commitment to and implementation of international treaties

Key Areas of Weakness  Inconsistent enforcement against counterfeit and pirated goods, especially goods sold online  Increasingly narrow interpretation of patentability of biotech inventions and CIIs  Ambiguity concerning ISP obligation to respond to trademark-holder notice of infringement  Concerns over border officials’ ability to share information with rights holders and newer methods of export

Spotlight on the National IP Environment Past Editions versus Current Scores The United States’ overall score remained the same at 95% of the total possible score, with a slight increase in score from 28.53 in the 3rd edition of the Index to 28.61 in the 4th edition. The change is mainly a result of the replacement of the GTRIC-e measure of physical counterfeiting with the Global Physical Counterfeiting Measure. Generally speaking, a great deal of legislative and administrative activity (including guidelines in relation to patenting and reviews of the copyright system) took place in 2015, with the goal of closing existing loopholes and addressing new challenges in the U.S. IP system, though at the time of research the large majority of initiatives were still ongoing. Court rulings in 2015 largely supported and upheld IP rights while 129

Based on software piracy rates (18%) compiled by the BSA.

205

interpreting them for new trends and developments, including in relation to the fair use of copyrights. In contrast, patentability criteria continue to become narrower, particularly for biotechnology and computing inventions. Areas of Note The United States continues to face challenges from bad faith actors who do not create IP and instead seek to take advantage of the patent system and existing recourse mechanisms at the administrative and judicial levels in order to draw financial gain. Various legislative and policy initiatives have been proposed concerning how to address these challenges. Each have merits and also possible shortcomings. It is crucial that any final piece of legislation or policy measure would both uphold strong IP protection as well as eliminate channels for bad faith actors. In addition, draft legislation proposed in the U.S. Congress in 2015 would provide a tax break for income generated from IP rights. Aimed at enhancing R&D taking place in the United States, the final version should ensure that a clear definition of IP qualifying for the tax relief is present in the text. Patents, Related Rights, and Limitations 2. Patentability requirements and 3. Patentability of computer-implemented inventions (CIIs): New U.S. Patent and Trademark Office (USPTO) guidance issued in late 2014 and 2015 on patentability of biotechnology and computer-implemented inventions based on recent court decisions (namely, Association for Molecular Pathology v. Myriad Genetics, Inc., 2013; Mayo Collaborative Services v. Prometheus Laboratories, Inc., 2012; and Alice Corporation Pty. Ltd. v. CLS Bank, 2014) confirm and extend the increasingly narrow approach taken by the USPTO to patentability. Under the new guidance, such an approach includes not only biotechnology and diagnostic-related subject matter but also business methods and computing. The guidelines present a two-step eligibility test in which subject matter dealing with these types of exceptions must demonstrate an inventive step— something “significantly more” than a generic process and/or a material change from a naturally occurring substance—and in such a way that it will not inhibit other uses of the general exception in order to qualify as patentable. The USPTO has attempted to clarify what this means using various examples from recent case law; however, further clarification is still needed. Court decisions in 2015 (for instance, Ariosa Diagnostics v. Sequenom, 2015) appear to further raise the threshold for patentability for subject matter involving a generic process to include lack of any knowledge of that process at the time the patent was filed. In relation to CIIs, while the new guidance provides further clarity on what types of CIIs are considered patentable, more is needed. Since the guidelines’ release, a high number of claim invalidations related to computing processes have been issued (about 90% of claims proceedings, with roughly two-thirds of these relating to computing claims, or ideas implemented on a generic computer). This may suggest that while the guidelines themselves continue to permit patentability of software, there is need for further clarity in order to avoid an approach that is overly narrow or prohibitive for true software inventions. Future scores for these indicators will depend on how existing and forthcoming USPTO guidance is interpreted in practice.

206

Copyrights, Related Rights, and Limitations 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyright and related rights (including web hosting, streaming, and linking) and 10. Availability of frameworks that promote action against online piracy: As noted in the previous edition of the Index, various reviews of the copyright system are currently ongoing, and continue in 2015, including reviews by the U.S. Department of Commerce and Congress of the Digital Millennium Copyright Act (DMCA) and the notice and takedown system. In 2015, rights holders voiced some concern over a reported lack of ISP response to notices, though ISP response is generally strong. On the judicial front, in a lawsuit against the MovieTube platform and third-party sites linked to it, Motion Picture Association of America (MPAA) successfully achieved temporary shutdown of the websites (with a permanent injunction still under review at the time of research). 11. Scope of limitations and exceptions to copyrights and related rights and 12. Digital rights management legislation: The debate in the United States on the scope of fair use continued in 2015. Among other areas, in relation to computer programs, a Supreme Court decision to decline to amend a 2012 District court ruling in relation to Oracle v. Google confirmed that the limits of copyright exceptions for the sake of interoperability extend to programming instructions (including application programming interfaces, or APIs). It was thought that such use may be included within fair use of copyrighted software; however, the court determined that APIs are to be considered protected content. In addition, the Breaking Down Barriers to Innovation Act of 2015, currently under discussion in Congress, would expand certain exceptions to rules against circumvention of TPMs for reverse engineering and security purposes. 18. Availability of frameworks that promote action against online sale of counterfeit goods: In 2015, online auction platforms, including Etsy.com, called for the introduction of DMCA-style legislation for trademarks that would transfer liability for infringement on online platforms from intermediaries to individual sellers as long as intermediaries cooperate with an established notice and takedown mechanism. In addition, the National Intellectual Property Rights Center continued its initiative Operation In Our Sites. At the beginning of 2015, third-party research suggested that the top sites closed through the operation have been for counterfeit consumer goods and medicines. Trade Secrets and Market Access 19. Protection of trade secrets: A new trade secrets bill, the Defend Trade Secrets Act of 2015, introduced in both the U.S. House and Senate, would expand powers in the Economic Espionage Act (1996) to include private right of action for civil trade secret misappropriation claims in federal court. Available remedies would include injunctions and seizure of trade secrets. To address concerns of previous bills, the new bill seeks to limit the basis for ex parte seizure orders and the scope of authority with regard to accessing seized electronic devices (in order to not inadvertently disclose the trade secret).

207

Enforcement 26. Effective border measures: Under discussion in 2015 at the time of research, the Trade Facilitation and Trade Enforcement Act (S.1269 and H.R.644) includes provisions that direct customs officials to increase and speed up information sharing with rights holders to aid in identifying infringing goods as well as confirm their authority to seize infringing goods (even if the goods have not been officially registered) and notify rights holders. Also in 2015, a debate occurred over the U.S. Customs and International Trade Commission’s ability to prevent the import of infringing electronic transmissions. In ClearCorrect Operating, LLC v. International Trade Commission, the Court of Appeals for the Federal Circuit determined that the International Trade Commission’s authority to block imports does not extend to electronic transmissions. Membership and Ratification of International Treaties The United States is a contracting party to and has signed and ratified all of the international treaties covered in the GIPC Index, including the Patent Law Treaty, which it ratified in 2013. Furthermore, the United States has concluded and ratified several FTAs with substantive IP provisions, such as the Korea-U.S. trade agreement (2011). The United States is a negotiating party to the TPP.

208

Venezuela Scores Indicator Patents, Related Rights, and Limitations 1. Patent term of protection 2. Patentability requirements 3. Patentability of computer-implemented inventions 4. Pharmaceutical-related patent enforcement and resolution mechanism 5. Legislative criteria and use of compulsory licensing of patented products and technologies 6. Patent term restoration for pharmaceutical products 7. Regulatory data protection term Total Score—Patents Copyrights, Related Rights, and Limitations 8. Copyright (and related rights) term of protection 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) 10. Availability of frameworks that promote cooperative action against online piracy 11. Scope of limitations and exceptions to copyrights and related rights 12. Digital rights management legislation 13. Clear implementation of policies requiring proprietary software used on government ICT systems to be licensed software Total Score—Copyrights Trademarks, Related Rights, and Limitations 14. Trademarks term of protection (renewal periods) 15. Nondiscrimination/nonrestrictions on the use of brands in packaging of different products 16. Ability of trademark owners to protect their trademarks: requisites for protection 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks 18. Availability of frameworks that promote action against online sale of counterfeit goods Total Score—Trademarks Trade Secrets and Market Access 19. Protection of trade secrets 20. Barriers to market access Total Score—Trade Secrets and Market Access Enforcement

Score

Total Possible Score

0.5 0 0.25 0 0 0 0 0.75

7

0.63130 0.25 0.25 0.25 0 0.25 1.63

6

1 1 0.25 0.25 0 2.5

5

0.25 0 0.25

2

130

Calculated as the average of the minimum term of protection (60 years), divided by the baseline term of 95 years.

209

21. Physical counterfeiting rates 22. Software piracy rates 23. Civil and procedural remedies 24. Preestablished damages and/or mechanisms for determining the amount of damages generated by infringement 25. Criminal standards including minimum imprisonment and minimum fines 26. Effective border measures Total Score—Enforcement Membership and Ratification of International Treaties 27. WIPO Internet Treaties 28. Singapore Treaty on the Law of Trademarks 29. Patent Law Treaty 30. At least one free trade agreement with substantive and/or specific IP provisions such as chapters on IP and separate provisions on IP rights provided it was signed after WTO/TRIPS membership Total Score—Treaties Total Overall Score

0.42131 0.12132 0.25 0 0 0 0.79

6

0.5 0 0 0 0.5 6.42

4 30

Strengths and Weaknesses Key Areas of Strength  Basic copyright and trademark frameworks in place  Dedicated anticounterfeiting effort (though still very little action)  Fairly balanced copyright penalties available under the law  Signatory to WIPO Internet Treaties

Key Areas of Weakness  Very weak patent framework  Sector-specific patents and IP rights not available  No effective copyright notice and takedown mechanism  Major holes in exceptions to copyrights and DRM framework  Legislation does not directly address unregistered marks, with little recognition of well-known marks  Enforcement generally poor; penalties either insufficient or draconian; administrative inaction

Spotlight on the National IP Environment Patents, Related Rights, and Limitations 1. Patent term of protection: The standard term of protection for patents in Venezuela is 10 years. 2. Patentability requirements: The Industrial Property Law (1955) provides for the standard patentability requirements of novelty, inventiveness, and industrial applicability. As stated, however, there is a great deal of ambiguity as to whether all three should be fulfilled for an invention to be patentable, or whether meeting just one 131

Calculated based on the Global Measure of Physical Counterfeiting, where Venezuela ranked 16 out of 38 economies mapped. 132 Based on software piracy rates (88%) compiled by the BSA.

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requirement is sufficient, as well as a clear definition of each. In violation of Article 27 of the TRIPS Agreement, chemical preparations, use of natural substances, second use, and new forms of pharmaceutical inventions are specifically excluded from patentability in Venezuela. Inventions created using public funds or means are also not patentable. The Venezuelan Autonomous Intellectual Property Service (SAPI) has not issued a patent since at least 2007, and by some counts, since 2000. Pharmaceutical patents have not been granted since 2002. 3. Patentability of computer-implemented inventions: The patentability of software is not clear under the Industrial Property Law. Computer programs are not explicitly excluded. Nevertheless, patent applications for computer technologies represent less than 2% of total patent applications since 1999. Copyrights, Related Rights, and Limitations 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) and 10. Availability of frameworks that promote action against online piracy: The Law on Copyright (1993) includes measures that provide for the moral rights of authors; however, no specific provisions address rights relevant to digital exploitation of works. Moreover, Venezuelan laws do not establish the liability of intermediaries or ISPs specifically in the context of IP infringement. Rather, legislative penalties are applied to infringing entities directly. In practice, online and physical piracy of software, music, and films are widespread in Venezuela. In addition, there is a general lack of knowledge concerning copyright protection in the online sphere, and the copying of protected works, including for commercial purposes, is considered acceptable by the public at large. Still, local legal analysis suggests that ISPs demonstrate increasing awareness of online infringement and will in some cases take down infringing content if a cease and desist letter is sent. Trademarks, Related Rights, and Limitations 16. Ability of trademark owners to protect their trademarks: requisites for protection; and 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks: Rights of trademark holders are not well defined in the Industrial Property Law. It does not explicitly prohibit the registration of marks that are similar or identical to marks determined to be well known. It does provide some protection against marks that have likelihood of confusion with existing, registered marks. Article 33 prohibits the registration of a trademark that is similar or identical to a registered mark or that may cause confusion as to origin or quality. Though directed toward registered marks, this provision has also served as a basis in some cases for protection of well-known marks, though generally recognition of well-known marks is uncommon. In addition, it is possible to secure remedies for trademark infringement under Venezuelan competition law, within which an infringing act may be deemed illegal if it is explicitly intended to compete with a product associated with the mark, causes damages to the trademark owner, and leads to customer confusion. Industry reports suggest that SAPI regularly approves and publishes applications for trademarks that are similar, if not nearly identical, to registered marks. In addition, counterfeiting is widespread, particularly of medicines and consumer goods such as apparel and footwear.

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Enforcement 23. Civil and procedural remedies and 25. Criminal standards including minimum imprisonment and minimum fines: Under the Industrial Property and Copyright Acts and the Penal Code, civil and criminal remedies are available for IP infringement, including injunctive relief, seizure and destruction of goods, damages, fines, and imprisonment. However, penalties are considered to be nondeterrent and disproportionate to the infringing acts, being either very weak or extremely severe. Only a 1–12 months’ prison term is available for patent and trademark infringement. However, in the particular case of smuggling counterfeit goods, the penalty under the Criminal Smuggling Law (2010) is 9–12 years’ imprisonment. Copyright offenses draw more balanced penalties, with commercial exploitation punishable with imprisonment of 1–5 years. In general, judicial proceedings involve long delays and authorities lack expertise and resources. No specific police forces or courts are dedicated to IP infringement cases, and while the tax authority, the National Integrated Service for the Administration of Customs Duties and Taxes, does have authority to take anticounterfeiting action, there is often lack of political will to do so. Membership and Ratification of International Treaties Venezuela scores 0.5 in its participation in and ratification of international treaties. It has signed but not ratified the WIPO Internet Treaties, but it is not a contracting party to the Singapore Treaty on the Law of Trademarks or the Patent Law Treaty. Moreover, it has not signed an FTA including a substantive IP chapter.

212

Vietnam Scores Indicator Patents, Related Rights, and Limitations 1. Patent term of protection 2. Patentability requirements 3. Patentability of computer-implemented inventions 4. Pharmaceutical-related patent enforcement and resolution mechanism 5. Legislative criteria and use of compulsory licensing of patented products and technologies 6. Patent term restoration for pharmaceutical products 7. Regulatory data protection term Total Score—Patents Copyrights, Related Rights, and Limitations 8. Copyright (and related rights) term of protection 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) 10. Availability of frameworks that promote cooperative action against online piracy 11. Scope of limitations and exceptions to copyrights and related rights 12. Digital rights management legislation 13. Clear implementation of policies requiring proprietary software used on government ICT systems to be licensed software Total Score—Copyrights Trademarks, Related Rights, and Limitations 14. Trademarks term of protection (renewal periods) 15. Nondiscrimination/nonrestrictions on the use of brands in packaging of different products 16. Ability of trademark owners to protect their trademarks: requisites for protection 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks 18. Availability of frameworks that promote action against online sale of counterfeit goods Total Score—Trademarks Trade Secrets and Market Access 19. Protection of trade secrets 20. Barriers to market access Total Score—Trade Secrets and Market Access Enforcement

Score

Total Possible Score

1 0.25 0 0 0 0 0.5 1.75

7

0.53133 0.25 0 0 0.25 0 1.03

6

1 1 0.25 0.5 0.5 3.25

5

0.5 0 0.5

2

133

Calculated as the average of the minimum term of protection (50 years), divided by the baseline term of 95 years.

213

21. Physical counterfeiting rates 22. Software piracy rates 23. Civil and procedural remedies 24. Preestablished damages and/or mechanisms for determining the amount of damages generated by infringement 25. Criminal standards including minimum imprisonment and minimum fines 26. Effective border measures Total Score—Enforcement Membership and Ratification of International Treaties 27. WIPO Internet Treaties 28. Singapore Treaty on the Law of Trademarks 29. Patent Law Treaty 30. At least one free trade agreement with substantive and/or specific IP provisions such as chapters on IP and separate provisions on IP rights provided it was signed after WTO/TRIPS membership Total Score—Treaties Total Overall Score

0.11134 0.19135 0.25 0.25 0.25 0.25 1.3

6

0 0 0 0 0 7.83

4 30

Strengths and Weaknesses Key Areas of Strength  Basic patentability framework  Basic exclusive rights for copyrights and trademarks in place  New legal requirement for notice and takedown platforms in relation to trademark infringement; voluntary mechanisms also exist  Action against online counterfeiting (registration of online retailers)  Elemental framework for IP rights enforcement; some positive application of damages  Agreement of EU-Vietnam FTA  International partnerships aimed at trademark reform

Key Areas of Weakness  Challenging patent enforcement environment with inadequate patent linkage mechanism  Compulsory license and RDP frameworks vague  No effective copyright notice and takedown mechanism  Major holes in exceptions to copyrights and DRM framework  Legislation does not directly address unregistered marks  Strict interpretation of well-known marks  Market access barriers  Very high physical counterfeiting rates  Generally poor enforcement: insufficient penalties, inactive administration

134

Calculated based on the Global Measure of Physical Counterfeiting, where Vietnam ranked 4 out of 38 economies mapped. 135 Based on software piracy rates (81%) compiled by the BSA.

214

Spotlight on the National IP Environment Past Editions versus Current Scores Vietnam’s overall score remains the same as in the 3rd edition of the Index at 26% of the total possible score (with a score of 7.84 in the 3rd edition and 7.83 in the 4th edition). The change is score is mainly a result of the replacement of the GTRIC-e measure of physical counterfeiting with the Global Physical Counterfeiting Measure. Although 2015 saw greater recognition and dedicated effort on the part of administrative authorities toward improving the enforcement of IP rights, in practice little real change occurred. At the same time, greater access to new technologies by a wider portion of the population has meant that the scale of infringement has only continued to grow. Some incremental improvements were made, especially in relation to administrative enforcement and instances of civil action, but not enough to warrant a score change. Potential for score improvement exists in future editions of the Index, pending signature and ratification of the TPP and EU-Vietnam FTA. Patents, Related Rights, and Limitations 4. Pharmaceutical-related patent enforcement and resolution mechanism: Vietnam does not have in place a patent linkage that allows for adequate time to resolve patent disputes before granting a generic registration. Circular 44/2014/TTBYT, Article 13.3, which was enacted in 2015, provides a mechanism for a rights holder to notify the Drug Administration Department (DAV) of potentially infringing registration applications. Nevertheless, while the circular authorizes DAV to reject a registration application based on grounds of IP infringement, it does not define the “sufficient grounds” needed for proving that infringement is taking place. Rather, the measure implies that a ruling of infringement by the National Office of Intellectual Property (NOIP), or a domestic court would be required. It also does not include a system for notification of, or dialogue with, the generic manufacturers prior to market authorization. For generic drugs that have already been granted registration, the circular (Article 13.4) does introduce a mechanism for revoking the registration based on a determination by the NOIP or local courts. In practice, however, NOIP does not typically provide such rulings formally. In addition, the local court system is known for severe delays and lack of experience with IP issues. Preliminary injunctions are not known to have been issued on the basis of patent infringement. There are infrequent examples of multinational research-based companies securing market authorization revocations based on investigations by administrative bodies. For instance, in 2015, a Ministry of Science and Technology (MOST) review confirmed infringement of a patent on a major diabetes drug, leading to a raid of the facilities of the generic producer and a reversal of the market authorization on the generic product. Copyrights, Related Rights, and Limitations 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) and 10. Availability of frameworks that promote action against online piracy: As noted in previous editions of the Index, the 2012 Joint Circular on Stipulations on the Responsibilities for Intermediary Service Providers in the Protection of Copyright and Related Rights on the Internet and Telecommunications Networks requires various ISPs (including social media networks) to issue warnings to infringing users. Although industry reports somewhat greater cooperation in takedown from ISPs in response to cease and desist letters from the Ministry of 215

Information and Communication (MIC) and the Ministry of Culture (MCST), volume is still highly disproportionate to the scale of piracy, especially in relation to commercial-scale infringing sites. Indeed, the significant increase in contentproviding sites has meant that piracy over streaming, P2P, and linking sites as well as cyberlockers and social networks remains a significant if not even greater problem than in previous years. For instance, according to Department of Film, today there are estimated 400+ local websites that provide access to tens of thousands of unlicensed films. A popular music website, Zing.vn, was recently listed on the USTR’s List of Notorious Markets in relation to providing access to unlicensed music. Moreover, despite removal or blocking of infringing content by MIC and MCST, such sites continue to exist or reappear. Textbook piracy around universities also continues to be prevalent. Trademarks, Related Rights, and Limitations 16. Ability of trademark owners to protect their trademarks: requisites for protection: The Intellectual Property Law, as amended in 2009, provides protection for well-known marks that are widely known throughout the Vietnamese territory. Trademark squatting is increasingly a problem in Vietnam, with local companies sometimes filing hundreds of applications for globally famous marks. Given the scale of the problem, it is difficult to obtain adequate relief and the large majority of bad faith registration cases are never brought or heard. Moreover, cases involving a mark that has not been in use in the economy for a significant amount of time are not likely to be successful. Even when they have, unless a mark is identical to the well-known mark (and not merely similar, even if the products are similar), it is generally impossible to obtain relief on the basis of bad faith (see, for instance, a 2015 ruling by the Hanoi People’s Court upholding a decision by MOST involving a U.S. company that produces automotive lubricants, Malco Products). Administrative remedies (largely through MOST) are available on the basis of unfair competition. Rights holders must prove that use of the third-party product (mark or trade dress) would lead to confusion as to the origin of the products in question and that the unregistered mark/trade dress was “widely used” (based on in-depth proof of use in the economy for at least five years) prior to the registration of the third-party mark. In one example of successfully obtaining relief in 2015, a European drug company secured destruction of the goods and packaging of a local manufacturer that was producing a similar product using similar trade dress. The case also occurred in a relatively short period of time―three months―although unfair competition cases are typically much more drawn out. MOST is in process of reviewing Vietnamese law governing protection of well-known marks in partnership with INTA, as part of a memorandum of understanding signed with INTA in 2015, to introduce trademark reforms and practical improvements to enforcement in order to bring the laws in line with international standards. This activity is occurring along with a wider initiative, Program 168, among nine ministries and enforcement agencies aimed at promoting stronger IP protection. 18. Availability of frameworks that promote action against online sale of counterfeit goods: Circular 47/2014/TT-BCT was enacted in January 2015 and, among other elements, it provides guidance on implementation of Decree 52 on ecommerce. The circular reiterates the liability and responsibility of ISPs and ecommerce websites to remove information on counterfeit or otherwise infringing 216

products and services “immediately” upon becoming aware of it or receiving a formal order. E-commerce sites are also required to register with the Vietnam E-Commerce and Information Technology Agency (VECITA). Although at least 300 e-commerce sites are reportedly registered, according to VECITA consumer survey data, the majority of respondents (close to 90%) have reported incidents of unregistered ecommerce sites. VECITA also handles remedies for sites found to contain infringing goods, and according to the agency, at least 50 cases of unauthorized websites were processed in 2015, including in relation to pharmaceuticals, footwear, cosmetics, and automobiles (with many involving counterfeit products). The extent to which ISPs are cooperating voluntarily in response to a notice of infringing goods and sites is unclear. Enforcement 23. Civil and procedural remedies: The enforcement environment remains challenging in Vietnam, though some positive developments are taking place. Circular 11/2015/TT-BKHCN, which was enacted in 2015 and implements Decree 99/2013/ND-CP, expands administrative penalties available against counterfeits, including about confiscation and destruction of counterfeit goods. Discussion on introduction of special IP judges is also in progress. In conjunction with the abovementioned Program 168 Phase II (2012–2015), 2015 data suggest that over 2013–14, administrative and enforcement bodies in Vietnam handled in total over 20,000 cases of infringement with fines of close to 140 billion dong (about USD6 million), including a special focus on counterfeits (physical and online) and software piracy. Nevertheless, vis-à-vis copyright infringement more broadly as well as patent violations, very few civil cases take place, and when they do occur, they involve great deal of red tape, lack of judicial expertise, and ambiguity in the law as to how to assess infringement, making enforcement highly unpredictable. 25. Criminal standards including minimum imprisonment and minimum fines: The Criminal Code provides penalties for IP infringement; however, it does not criminalize all acts of infringement identified in IP law. In addition, the language on penalties is often vague, and deterrent penalties are not frequently issued, particularly for the manufacturing, supplying, and selling of counterfeit medicines. Decree 185/2013/ND-CP, which came into effect January 2014, provides more detail on remedies and penalties for online trade in counterfeit goods. However, given the high rates of counterfeiting in Vietnam, the scope and the lightness of penalties in the measure—including confiscation of goods, suspension of operations for six months to one year, revocation of the domain name, and fines of VND40–50 million (USD1,900–2,300)—cannot be considered deterrent. Membership and Ratification of International Treaties Vietnam scores 0 in its participation in and ratification of international treaties. Vietnam is not a contracting party to any of the treaties covered in the Index. However, in 2015, Vietnam reached an agreement on an FTA with the EU that reportedly involved a chapter with substantive IP provisions. The text was not yet been finalized or signed at the time of research. Upon signature and ratification, Vietnam’s score for this indicator will rise. In addition, Vietnam is one of the negotiating parties to the TPP. Negotiations concluded in October 2015. The accession by Vietnam to this treaty could also increase its score in this category.

217

Annex 1: Abbreviations API Active pharmaceutical ingredient CETA Comprehensive Economic and Trade Agreement CIIs Computer-implemented inventions DRM Digital rights management EPO European Patent Office FDI Foreign direct investment FTA Free trade agreement GIPC U.S. Chamber of Commerce’s Global Intellectual Property Center ICT Information and communication technology IP Intellectual property ISP Internet service provider OECD Organisation for Economic Co-operation and Development RDP Regulatory data protection R&D Research and development TPM Technological protection measure TPP Trans-Pacific Partnership TRIPS Agreement on Trade-Related Aspects of Intellectual Property Rights UNCTAD United Nations Conference on Trade and Development WHO World Health Organization WIPO World Intellectual Property Organization WTO World Trade Organization

218

Annex 2: Methodology, Sources, and Indicators Explained The Index consists of 30 indicators across 6 separate categories:      

Patents, Related Rights, and Limitations; Copyrights, Related Rights, and Limitations; Trademarks, Related Rights, and Limitations; Trade Secrets and Market Access; Enforcement; and Membership and Ratification of International Treaties.

As in previous editions, these categories are for ease of organizing the Index and have no statistical impact on weightings or an economy’s overall score in the Index. Each indicator is explained in more detail below. Table I lists all 30 indicators that together make up the Index. Table I: Index: Categories and Indicators Category 1: Patents, Related Rights, and Limitations 1. Patent term of protection 2. Patentability requirements 3. Patentability of computer-implemented inventions 4. Pharmaceutical-related patent enforcement and resolution mechanism 5. Legislative criteria and use of compulsory licensing of patented products and technologies 6. Patent term restoration for pharmaceutical products 7. Regulatory data protection term Category 2: Copyrights, Related Rights, and Limitations 8. Copyright (and related rights) term of protection 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) 10. Availability of frameworks that promote cooperative action against online piracy 11. Scope of limitations and exceptions to copyrights and related rights 12. Digital rights management legislation 13. Clear implementation of policies and guidelines requiring that any proprietary software used on government ICT systems should be licensed software Category 3: Trademarks, Related Rights, and Limitations 14. Trademarks term of protection (renewal periods) 15. Nondiscrimination/nonrestrictions on the use of brands in packaging of different products 16. Ability of trademark owners to protect their trademarks: requisites for protection 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks 18. Availability of frameworks that promote action against online sale of counterfeit goods Category 4: Trade Secrets and Market Access 19. Protection of trade secrets 20. Barriers to market access Category 5: Enforcement 219

21. Physical counterfeiting rates 22. Software piracy rates 23. Civil and procedural remedies 24. Preestablished damages and/or mechanisms for determining the amount of damages generated by infringement 25. Criminal standards including minimum imprisonment and minimum fines 26. Effective border measures Category 6: Membership and Ratification of International Treaties 27. WIPO Internet Treaties 28. Singapore Treaty on the Law of Trademarks 29. Patent Law Treaty 30. At least one free trade agreement with substantive and/or specific IP provisions such as chapters on IP and separate provisions on IP rights provided it was signed after WTO/TRIPS membership 1. Scoring Methodology As in previous editions of the Index, each indicator can score values between 0 and 1 and the cumulative score of the Index ranges from a minimum of 0 to a maximum of 30. Indicators can be scored using three distinct methods: binary, numerical, and mixed. When an indicator is of a binary nature, each indicator is assigned either the value 0— if the particular IP component does not exist in a given economy—or 1—if the particular IP component does exist in a given economy. Numerical indicators are those indicators that, for example, measure terms of exclusivity or are based on a quantitative source. Terms of exclusivity are calculated by dividing the actual term of exclusivity of each relevant indicator by a standard baseline. For example, the standard baseline used for the copyright term is 95 years, a term based on U.S. law.136 Thus, the numerical formula for this subcategory is: “n years of basic copyright term/95.” If an economy has a copyright term of 95 years, the value it scores in this indicator is 1. If it has a copyright term of less than 95 years, then the value is less than 1. Details of the individual baselines used for different types of IP rights are provided in Table II. If no adequate baseline is available and the legislative or regulatory existence of an indicator is not sufficient to determine its actual use or application, the score for that indicator will be mixed. The final score for that indicator will be based on an even split between primary and/or secondary legislation (regulation) in place; and the actual application and enforcement of that primary and/or secondary legislation.

136

Many economies have a copyright term that is measured by the life of an author plus an additional number of years. Given the difficulties in measuring and estimating an average life of an author, and thus an average term of protection, this indicator uses only minimum terms, which are applied in lieu of the life of the author plus an additional number of years (i.e., in cases where the rights holder is unknown or has already died). Accordingly, 95 years is the minimum term applied in U.S. law.

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Mixed indicators make up 21 of the 30 of indicators used in the Index. Of the remaining 9 indicators, 7 are numerical and only 2 are binary. The increased use of mixed indicators provides greater flexibility when scoring and allows the Index to more effectively accommodate “gray areas” in economy performance for a given indicator. Specifically, it is possible to assign a partial score, rather than only 0 or 1. Five possible scores are available within a mixed indicator: 0, 0.25, 0.5, 0.75, and 1. The range of scores available for mixed indicators means that greater nuance can be used when individual indicators are scored; the practical end-result is that economies can receive partial scores for an indicator, which in some cases are a better approximation of their given reality. There are also a few instances in which rather than the de jure and de facto existence of a single element, a mixed indicator is split between two separate elements. For example, in Category 6: Membership and Ratification of International Treaties, the indicators are measured by the signature and ratification or accession to a given international treaty. Thus, 0.5 is given for being a signatory of a treaty and 0.5 for ratifying or acceding to that treaty. 2. Baselines Used When possible, the Index uses baseline values, measures, and models. These values are based on best practices regarding terms of protection, enforcement mechanisms (de jure and de facto), and/or model pieces of primary or secondary legislation that can be found at the national and international levels. Where no adequate baselines are found in international law or treaties, the baselines and values used are based on what rights holders view as an appropriate environment and level of protection. Table II: IP Rights Baselines Baselines Basic patent protection Copyrights Trademarks Regulatory data protection Patent term restoration

Baseline in Years 20 95 10 10 5

Legislation Model TRIPS U.S. WIPO EU EU/U.S.

3. Measuring Counterfeiting and Piracy Indicators 21 and 22 of the Index measure rates of physical counterfeiting and software piracy, respectively. Attempting to measure piracy and counterfeiting presents a number of challenges. First, illegal activities are inherently difficult to measure and quantify with a high level of accuracy. Out of necessity, estimates will be based on variables such as physical seizures and surveys. This is particularly the case for online piracy. Second, studies of piracy and counterfeiting rates are often either economy-specific (focusing on one or a relatively small sample of economies) or global, but not both. The result is a relative paucity in the number of studies that measure and compare levels of piracy and counterfeiting with a sample of economies sufficient enough to make large-scale comparisons empirically robust. 221

Last, because measures of piracy and counterfeiting are inexact, estimates of their economic impact can vary widely depending on the methodology and data samples used.137 Up until this edition, the Index has relied on two main sources for measuring piracy and counterfeiting: The OECD’s General Trade-Related Index of Counterfeiting of Economies (GTRICe), which measures the relative rates of physical counterfeiting for 134 economies (the latest year for which data is available is 2009);138 Software piracy rates compiled by the Business Software Alliance (BSA) (2014 being the latest survey).139 These sources are both robust and internationally recognized measures. Furthermore, they cover a large sample of economies, providing a sound basis for both crosseconomy comparisons and long-term use within the Index. Both the BSA software piracy rates and the GTRIC-e Index are numerical measures that can be transposed into two respective scores, for indicators 21 and 22, respectively. Still, there are caveats with the use of these measures, in particular the GTRIC-e. First of all, the GTRIC-e Index, which is based on international trade statistics and customs interception data, measures the relative rates of physical counterfeiting. Crucially, the GTRIC-e does not take into account or measure “domestically produced and consumed products or non-tangible pirated digital products.”140 The practical result is that a number of economies with relatively low levels of customs interception of counterfeit goods, yet high levels of domestically produced counterfeit goods or 137

These difficulties in measuring piracy are particularly pronounced for online piracy. No comprehensive studies exist that measure and compare rates of online piracy for a large sample of countries. Consequently, the indicators measuring piracy and counterfeiting in the Index are primarily based on physical piracy and counterfeiting, with the data from the BSA being based on both physical and digital software piracy. Nevertheless, a number of academic and industry-supported studies measure rates of online piracy and its economic impact either on a global basis or for a few large economies. For example, a 2011 study commissioned by NBCUniversal and produced by Envisional found that 23% of global Internet traffic was estimated to be infringing in nature. Similarly, a 2011 report by Frontier Economics estimated the total value of counterfeit and pirated products in 2008 and forecast for 2015 to be $455–$650 billion and $1,220–$1,770 billion, respectively. Out of this total, digitally pirated products were estimated at $30–$75 billion in 2008 and forecast to be $80–$240 billion in 2015. Furthermore, this report found that online piracy in the United States made up a large share of this digital piracy figure. For 2008, the report estimated that $7–$20 billion worth of digitally pirated recorded music was consumed in the United States, with an additional $1.4–$2 billion of digitally pirated movies also consumed. Last, the vast majority of academic papers and economic analyses have found that online piracy and file sharing has had a negative impact on media sales, including music. For details, see Envisional (2011), Technical Report: An Estimate of Infringing Use of the Internet (Cambridge, 2011), p. 2; Frontier Economics (2011), Estimating the Global Economic and Social Impacts of Counterfeiting and Piracy (London, 2011), pp. 56–8; and Smith, M.D. & Telang, R. (2012), Assessing the Academic Literature regarding the Impact of Media Piracy on Sales (Social Science Research Network, 2012). 138 OECD (2009), Magnitude of Counterfeiting and Piracy of Tangible Products: An Update, pp. 5–6. 139 Business Software Alliance (BSA) (2014), The Compliance Gap: BSA Global Software Survey, June 2014. 140 Ibid. pp. 1–2.

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high levels of online piracy, rank quite well within the GTRIC-e. This may not present an accurate reflection of their overall piracy and counterfeiting environment. For example, the rank of Argentina, Brazil, Chile, and Mexico in the GTRIC-e Index is slightly misleading as all four economies in other measures—not least the BSA software piracy estimates—have high rates of piracy. Furthermore, economies such as Argentina have high rates of physical piracy. For example, the La Salada street market outside Buenos Aires is estimated to be the largest informal market in Latin America, with a significant portion of goods sold being pirated.141 More generally, the informal economy in Argentina has been estimated by the local chambers of commerce as being worth over 3% of GDP.142 Second, the GTRIC-e is quite dated. Last updated in 2009, the underlying data it relies on is from the mid-2000s. Consequently, there is a question of whether it is still a reliable indicator of overall levels of counterfeiting. To address this challenge, the 4th edition of the Index now incorporates a new proprietary Global Measure of Physical Counterfeiting. The measure has been developed by the U.S. Chamber of Commerce and Pugatch Consilium to provide a new global measure of physical trade-related counterfeiting. It provides a total and per economy estimate of physical trade-related counterfeiting rates for each of the 38 economies included in the Index. The full details of the building of the model, methodology, sources used, and an assessment of the wider threat of physical counterfeiting is provided in the report Measuring the Magnitude of Global Physical Counterfeiting available on the GIPC and U.S. Chamber of Commerce’s website. In brief, the methodology of the Global Measure of Physical Counterfeiting builds on that developed by the OECD and the GTRIC-e. Using and updating the OECD’s estimates of total global levels of physical counterfeiting as a share of world trade, the Global Measure of Physical Counterfeiting estimates the percentage and dollar value of trade-based physical counterfeiting for each of the 38 economies included in the Index. The results of the Global Measure of Physical Counterfeiting are provided below in Table III. Table III: Index Sampled Economies’ Share of Global Physical Counterfeiting Percentage of the Share (in $) of sampled economies’ Rank Economy global physical share of global physical counterfeiting counterfeiting China $ 259,947,360,000 1 Ukraine $ 1,514,669,102 4.79% 2 Thailand $ 1,499,131,068 4.74% 3 Vietnam $ 1,467,013,811 4.64% 4 Turkey $ 1,297,156,771 4.10% 5 Indonesia $ 1,278,180,396 4.04% 6 India $ 1,270,081,919 4.02% 7 141 142

Percentage of total global physical counterfeiting figure 72.00% 0.42% 0.42% 0.41% 0.36% 0.35% 0.35%

The Economist (2014), “Stall Stories,” January 25, 2014. Dialogo (2011), “Argentina: Black Market Targeted by Authorities,” July 20, 2011.

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8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38

Peru Nigeria UAE Malaysia Ecuador Russia Algeria Taiwan Venezuela Colombia Argentina Italy Brazil South Africa Mexico South Korea Poland Chile Israel Singapore Canada Switzerland United States Brunei Darussalam France Australia United Kingdom New Zealand Japan Germany Sweden

$ 1,229,833,974 $ 1,217,916,523 $ 1,217,696,552 $ 1,205,841,500 $ 1,160,496,497 $ 1,145,770,897 $ 1,125,718,885 $ 1,113,378,821 $ 1,070,433,004 $ 1,020,969,353 $ 1,014,756,905 $ 959,940,352 $ 924,929,911 $ 879,605,511 $ 816,260,906 $ 803,242,966 $ 679,871,173 $ 613,648,469 $ 608,626,870 $ 552,553,021 $ 551,684,093 $ 455,235,495 $ 406,359,000 $ 392,746,555 $ 384,080,284 $ 355,520,824 $ 351,820,927 $ 337,364,223 $ 319,709,373 $ 263,807,996 $ 110,043,733

3.89% 3.85% 3.85% 3.81% 3.67% 3.62% 3.56% 3.52% 3.39% 3.23% 3.21% 3.04% 2.93% 2.78% 2.58% 2.54% 2.15% 1.94% 1.93% 1.75% 1.74% 1.44% 1.29% 1.24% 1.21% 1.12% 1.11% 1.07% 1.01% 0.83% 0.35%

0.34% 0.34% 0.34% 0.33% 0.32% 0.32% 0.31% 0.31% 0.30% 0.28% 0.28% 0.27% 0.26% 0.24% 0.23% 0.22% 0.19% 0.17% 0.17% 0.15% 0.15% 0.13% 0.11% 0.11% 0.11% 0.10% 0.10% 0.09% 0.09% 0.07% 0.03%

The calculation for indicator 21 is based on each economy’s relative ranking in the above Global Measure of Physical Counterfeiting. It is a simple numerical calculation of an economy’s rank (based on its relative rate of counterfeiting) divided by the total number of economies (38) included in the Global Measure of Physical Counterfeiting. For example, economy X ranks 15 on the Global Measure of Physical Counterfeiting. Calculating that economy’s Index score for indicator 21 is thus the numerical result of dividing 15 by 38. The BSA survey expresses an economy’s software piracy rate as a percentage. Within the Index, the reverse of the BSA software piracy percentage is used as the score for indicator 22; the higher the BSA software piracy rate is in an economy, the lower its score on the Index. For example, if economy X has a software piracy rate of 90% 224

according to the BSA, it receives a score of 0.10 for indicator 22 within the Index. Table IV shows the latest BSA software piracy rate for all economies sampled in the Index together with their respective score for indicator 22. Table IV: BSA Ranking of Software Piracy Rates 2013,143 Index Economies Economies BSA Software Piracy Rate Indicator 22 Score Venezuela Algeria Indonesia Ukraine Nigeria Vietnam China Thailand Argentina Ecuador Brunei Peru Russia India Turkey Chile Malaysia Mexico Colombia Poland Brazil Italy Taiwan South Korea France UAE South Africa Singapore Israel Canada Germany Switzerland United Kingdom Sweden Australia New Zealand Japan United States 143

88% 85% 84% 83% 81% 81% 74% 71% 69% 68% 66% 65% 62% 60% 60% 59% 54% 54% 52% 51% 50% 47% 38% 38% 36% 36% 34% 32% 30% 25% 24% 24% 24% 23% 21% 20% 19% 18%

0.12 0.15 0.16 0.17 0.19 0.19 0.26 0.29 0.31 0.32 0.34 0.35 0.38 0.40 0.40 0.41 0.46 0.46 0.48 0.49 0.50 0.53 0.62 0.62 0.64 0.64 0.66 0.68 0.70 0.75 0.76 0.76 0.76 0.77 0.79 0.80 0.81 0.82

BSA (2014)

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In addition to these two measures, individual economy-specific measures of physical and online software piracy are, when available and credible, used as part of the evidence for evaluating an economy’s overall enforcement environment and application of relevant IP legislation. 4. Sources Scoring in the Index is based on both qualitative and quantitative evidence. To provide as complete a picture of an economy’s IP environment as possible, this evidence is drawn from a wide range of sources. All sources are publicly available and accessible to all. The following is an outline of the different types of sources used. Government Sources from government branches and agencies include  Primary legislation;  Secondary legislation (regulation) from executive, legislative, and administrative bodies;  Reports from parliamentary committees and government agencies, including patent or IP offices as well as enforcement agencies; and  Internal departmental guidelines, policies, assessments, and audits. Legal Sources from judicial authorities and legal practitioners include Court cases and decisions; Legal opinions written by judges; and Legal analysis and opinions written by legal practitioners. International Institutions and Third Parties These sources include Data, studies, and analysis from international organizations such as the OECD, WTO, and WIPO; Publicly available reports, studies, and government submissions by industry organizations; and Reports from nongovernmental organizations and consumer organizations. Academic Academic sources include Academic journals; and Legal journals. News News sources include Newspapers; News websites; and Trade press. 5. Indicators Explained This section explains how each indicator in the Index is measured and scored. 226

Category 1: Patents, Related Rights, and Limitations The indicators included in this category relate to patent protection and related rights and limitations. 1. Patent term of protection – Measured by the basic patent term offered in the TRIPS Agreement. This is a numerical indicator. 2. Patentability requirements – The extent to which patentability requirements are in line with international standards of novelty, inventive step, and industrial applicability.144 Measured by (1) existing de jure patentability guidelines and regulations and (2) de facto standards established through the application of these guidelines and regulations through the examination process and judicial review. This is a mixed indicator. 3. Patentability of computer-implemented inventions – Measured by the extent to which primary and/or secondary legislation explicitly allows for the patentability of CIIs. This is a mixed indicator. 4. Pharmaceutical-related patent enforcement and resolution mechanism – Measured by the existence of primary and/or secondary legislation (such as a regulatory mechanism) that provides a transparent pathway for adjudication of patent validity and infringing issues before the marketing of a generic or biosimilar product. This score is evenly divided between the existence of relevant primary and/or secondary legislation and its application/enforcement. If no legislation is in place, the maximum score that can be achieved is 0.5 and is based on the extent to which de facto practices are in place that achieve a similar result. This is a mixed indicator. 5. Legislative criteria and use of compulsory licensing of patented products and technologies – Measured by the extent to which primary and/or secondary legislation on the use of compulsory licensing (on the basis of the essential facilities doctrine) and its application/enforcement is transparent and consistent with the following criteria: (1) the issuing should exclude any requirement for domestic manufacturing; (2) the issuing should not apply to patented innovations that have not yet reached the market; (3) in the case of biopharmaceutical products, the use of compulsory licensing under the framework of TRIPS provisions on public health should not be for commercial purposes, such as for price negotiations or in support of domestic industries; and (4) adequate and well-defined recourse mechanisms should be in place for parties affected by the issuing of the license. This is a binary indicator. 6. Patent term restoration for pharmaceutical products – Measured by the current baseline rate of five years used in the United States and EU. This protection is aimed at restoring the patent term granted to innovative pharmaceutical products, due to the prolonged research, development, and regulatory approval periods of such products.

144

International and best practices are defined here as those principles established in TRIPS Article 27: “Subject to the provisions of paragraphs 2 and 3, patents shall be available for any inventions, whether products or processes, in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application.”

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This category does not include other forms of patent term restoration that are granted on the basis of prolonged examination periods. This is a numerical indicator. 7. Regulatory data protection term – Measured by the optimal desired term, which is the term of exclusivity used by the EU for new biopharmaceutical products containing new active ingredients regardless of molecular size and/or complexity.145 This is a numerical indicator. Category 2: Copyrights, Related Rights, and Limitations The indicators included in this category relate to copyright protection and related rights and limitations. 8. Copyright (and related rights) term of protection – Measured by the baseline term of protection—95 years, which is the term afforded in the United States—not the variable the length of an author’s life. Terms of protection are measured as the minimum term allowed by copyright law. Where different minimum terms of protection are used for different forms of copyright, all terms are added together and divided by 95. This is a numerical indicator. 9. Legal measures that provide necessary exclusive rights that prevent infringement of copyrights and related rights (including web hosting, streaming, and linking) – Measured by the extent to which economies (1) have in place laws and procedures that provide necessary exclusive rights and (2) apply these laws to prevent, deter, and remedy online infringement of copyright and related rights. This is a mixed indicator. 10. Availability of frameworks that promote cooperative action against online piracy – Measured by the existence of clear standards for the limitation of liability for copyright and related rights infringement by ISPs that expeditiously remove infringing material upon obtaining knowledge of it, in the context of an overall system that does not unduly burden ISPs, promotes cooperation between ISPs and rights holders to address online piracy, and respects and protects users’ rights. This is a mixed indicator. 11. Scope of limitations and exceptions to copyrights and related rights – Measured by the extent to which exceptions and limitations are consistent in text and in application with the three-step test originating in the Berne Convention (Berne threestep test).146 The score for this indicator is evenly divided between legislation and application in the court system. This is a mixed indicator. 12. Digital rights management legislation – Measured by the extent to which economies have (1) passed primary and/or secondary legislation relating to DRM and

145

Half (0.5) of the available score is based on the term available for biologics or large molecule compounds. If a country’s relevant legislation/regulation either de jure or de facto does not cover such compounds, then the maximum score that can be achieved in this indicator is 0.5. The baseline numerical term used is that by the EU of 10 years (8+2) of marketing exclusivity. 146 The Berne three-step test generally requires that limitations and exceptions to copyrights (1) should be confined to special cases, (2) that do not conflict with a normal exploitation of the work, and (3) do not unreasonably prejudice the legitimate interests of the rights holder (TRIPS Agreement, Article 13).

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technological protection measures and (2) applied this legislation. This is a mixed indicator. 13. Clear implementation of policies and guidelines requiring that any proprietary software used on government ICT systems should be licensed software – Measured by the extent to which (1) policies and guidelines are in place that stipulate the use of only licensed proprietary software and (2) these policies and guidelines are applied. This is a mixed indicator. Category 3: Trademarks, Related Rights, and Limitations The indicators in this category relate to trademark protection and related rights and limitations. 14. Trademarks term of protection (renewal periods) – Measured by the renewal term of protection being offered, with the baseline term being 10 years as provided by the Singapore Treaty on the Law of Trademarks. This is a numerical indicator. 15. Nondiscrimination/nonrestrictions on the use of brands in packaging of different products – Measured by the extent to which different national laws and regulations do not unreasonably limit the rights holder from using or putting his brand, trademark, or corresponding trade dress on the package of his products, thereby curtailing his rights under trademark protection. This is a binary indicator. 16. Ability of trademark owners to protect their trademarks: requisites for protection – Measured by the extent to which existing laws and regulations and/or de facto practices allow for trademark protection through use of the mark, regardless of whether the trademark owner registers the mark. This is a mixed indicator. 17. Legal measures available that provide necessary exclusive rights to redress unauthorized uses of trademarks – Measured by the extent to which economies (1) have in place laws and procedures that provide necessary causes of action to address violations of a trademark owner’s rights (such as infringement of registered trademarks, unfair competition, false designation of origin, false advertising, dilution of famous trademarks, cybersquatting, and violation of rights associated with a corresponding trade dress), which create a likelihood of public confusion as to source, sponsorship, or affiliation; and (2) apply these laws to prevent, deter, and remedy infringement of trademarks and related rights. This is a mixed indicator. 18. Availability of frameworks that promote action against the online sale of counterfeit goods – Measured by the existence of clear rules and standards for the expeditious removal of trademark-infringing material by online service providers upon obtaining knowledge of the infringement, in the context of an overall system that does not unduly burden such providers, promotes cooperation between them and rights holders to address the infringement of trademark rights, and respects and protects consumers’ rights. This score is evenly divided between the existence of relevant primary and/or secondary legislation and its application/enforcement. In the absence of a legal or regulatory framework, a score of up to 0.5 can be allocated based

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on the existence and effectiveness of voluntary industry standards and practices in place. This is a mixed indicator.147 Category 4: Trade Secrets and Market Access The indicators in this category relate to trade secrets, market access, and related rights and limitations. 19. Protection of trade secrets – Measured by the existence of (1) legislation that offers protection for trade secrets or confidential business information and (2) the application of this legislation in the court or law enforcement system. Economies that do not have legislation in place but in which trade secrets and confidential information are effectively protected through other mechanisms can receive a maximum score of 0.5. Model legislation is TRIPS (Article 39(1)) & (2)). This is a mixed indicator. 20. Barriers to market access – The extent to which laws and regulations or de facto practices do not make access to an economy’s market contingent on the sharing and/or disclosure of intellectual property and know-how with a local/domestic entity. This is measured by the extent to which (1) existing laws and procedures do not make market access contingent on the sharing/disclosure of intellectual property and knowhow and (2) the application of such laws or, in the absence of such laws, the existence of de facto practices and standards achieve a similar effect. This is a mixed indicator. Category 5: Enforcement The indicators in this category measure the prevalence of IP rights infringement, the criminal and civil legal procedures available to rights holders, punishment rates, and the authority of customs officials to carry out border controls and inspections. 21. Counterfeiting/piracy rates – Measured by estimated rates of general trade-related physical counterfeiting.148 This is a numerical indicator. 22. Software piracy rates – Measured by rates of software piracy. This is a numerical indicator.149 23. Civil and procedural remedies – Measured by (1) the existence of civil and procedural remedies, including injunctions, damages for injuries, and destruction of 147

Examples of voluntary and industry-based standards include those standards and policies used in the United States and elsewhere by providers such as eBay. The latter has a system in place—the Verified Rights Owner Program—that allows rights holders to protect their intellectual property through a process of notification and takedown in which eBay is notified of the infringement and promptly removes the material from its website. Full details of the system are available at http://pages.ebay.com/vero/intro/index.html. 148 The source used for this indicator is the Global Measure of Physical Counterfeiting. The measure has been developed by the U.S. Chamber of Commerce and Pugatch Consilium to provide a new global measure of physical trade-related counterfeiting. It provides a total and per economy estimate of physical trade-related counterfeiting rates for each of the 38 economies included in the Index. The full details of the building of the model, methodology, sources used, and an assessment of the wider threat of physical counterfeiting is provided in the report Measuring the Magnitude of Global Physical Counterfeiting available on the GIPC and U.S. Chamber of Commerce’s website. 149 Software piracy rates were compiled by the BSA (2014 being the latest survey).

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infringing and counterfeit goods, as well as (2) their effective application. This indicator also reflects administrative enforcement measures where applicable. This is a mixed indicator. 24. Pre-established damages and/or mechanisms for determining the amount of damages generated by infringement – This is a mixed indicator. 25. Criminal standards including minimum imprisonment and minimum fines – Measured by the extent to which (1) actual legislation is in place and (2) it is applied (i.e., where reliable source material is available, the actual level of prosecution and penalties applied). Model legislation includes TRIPS, Article 61. This is a mixed indicator. 26. Effective border measures – Measured by the extent to which goods in transit suspected of infringement may be detained or suspended. This indicator also measures the extent to which border guards have the ex officio authority to seize suspected counterfeit and pirated goods without complaint from the rights holder. This is a mixed indicator. Category 6: Membership and Ratification of International Treaties The indicators in this category measure whether an economy is (1) a signatory of and (2) has ratified or acceded to international treaties on the protection of IP. Indicators 27–29 are measured using WIPO as a source. The following treaties each make up one indicator: 27. WIPO Internet Treaties – These consist of the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty.150 Respectively, they cover and clarify the use of copyright in a digital environment and the moral and economic rights of phonogram performers and producers. This is a mixed indicator. 28. Singapore Treaty on the Law of Trademarks – This is a mixed indicator. 29. Patent Law Treaty – This is a mixed indicator. 30. At least one free trade agreement with substantive and/or specific IP provisions such as chapters on IP and separate provisions on IP rights provided it was signed after WTO/TRIPS membership – This is a mixed indicator.

150

The 2012 Beijing Treaty on Audiovisual Performance, which covers the rights of performers in audiovisual works, is also a relevant treaty. Given that it was signed by WIPO member states only in June 2012, however, it is too early to include it as a useful element of this indicator.

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i

A review of major works from the OECD and other organizations that rely on correlation analysis to show a positive effect of IP rights on technology transfer, FDI, and R&D can be found in Park, W.G. and Lippoldt, D. (2014), “Channels of Technology Transfer and Intellectual Property Rights in Developing Countries,” in Ahn et al., Intellectual Property for Economic Development, Cheltenham: Edward Elgar, pp. 33–78. ii The closer a correlation is to 1 (near 70 or above), the stronger the association between the two studied variables, while correlations falling very close to 1 are less meaningful because they indicate that a change in one variable is associated with an identical change in the other variable—and this is only likely to occur when the two variables are the same. To read more, see, for instance, “Correlation and Regression,” The BMJ, http://www.bmj.com/aboutbmj/resources-readers/publications/statistics-square-one/11-correlation-and-regression. iii Similar methods have been applied in relation to exploring the relationship between IP protection and economic activities, for instance, in a 2012 study by the U.S. Department of Commerce and U.S. Patent Office and in a 2013 study by the European Patent Office and EU Office for Harmonization in the Internal Market. (European Patent Office (EPO) and the Office for Harmonization in the Internal Market (OHIM) (2013), “Intellectual Property Rights Intensive Industries: Contribution to Economic Performance and Employment in the European Union, Industry-Level Analysis Report, September 2013,” pp. 6–7; Economic and Statistic Administration and United States Patent and Trademark Office (USPTO) (2012), “Intellectual Property and the U.S. Economy: Industries in Focus,” U.S. Department of Commerce. iv The IESE and EMYLON Business Schools’ Venture Capital and Private Equity Country Attractiveness Index measures economies’ attractiveness to VC and PE funding by examining a range of factors including the capital market, taxation environment, investor protection, entrepreneurial culture, and deal opportunities. See: Groh, A., Liechtenstein, H., Lieser, K., Biesinger, M. (2015), The Venture Capital and Private Equity Country Attractiveness Index: 2015 Annual, IESE Business School and EMYLON Business School; GIPC (2016). v See, for example, Haltom, R. (2013), “Why Was Canada Exempt from the Financial Crisis?,” Economic Focus, 4th Qtr., https://www.richmondfed.org/~/media/richmondfedorg/publications/research/econ_focus/2013/q4/pdf/feature2.pdf ; MacDougall, A., Yalden, R. M. (2015), “The Corporate Governance Review 2015: Canada,” Osler, https://www.osler.com/en/resources/governance/2015/the-corporate-governance-review-2015-canada. vi See, for instance, the 10-year Government Linked Companies (GLC) Transformation Program. OECD (2014), Corporate Governance in Asia, p. 10, http://www.oecd.org/daf/ca/48806174.pdf. vii OECD (2015), OECD Economic Surveys: Italy, February 2015, http://www.oecd.org/eco/surveys/Overview_Italy_2015_ENG.pdf. viii World Bank (2015); GIPC (2016). ix Kirschberg, E. (2012), “Business Demography and Labour Mobility in Research and Development Industry,” Working Paper No. 72, Israeli Central Bureau of Statistics, http://www.cbs.gov.il/www/publications/pw72.pdf. x Oram, A. (2010), “Innovation Lessons in ‘Start-Up Nation,’” O’Reilly Radar, http://radar.oreilly.com/2010/02/innovation-lessons-in-start-up.html. xi OECD (2014), “STI Country Profiles: Russian Federation,” OECD Science, Technology and Industry Outlook 2014, p. 408, OECD Publishing.

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xii

Source: OECDStat, “Patents by Technology, Triadic Patent Families, Total Patents, Inventor Country of Residence, Priority Date, 2011 or Closest Available Year,” World Bank (Population). xiii World Economic Forum, “The Global Competitiveness Report 2011–2012: Country Profile Highlights,” http://www3.weforum.org/docs/WEF_GCR_CountryProfilHighlights_2011 -12.pdf; European Commission (2011), Innovation Union Competitiveness Report 2011: Overall Review of EU Member States and Associated Countries, pp. 233–40, https://ec.europa.eu/research/innovation-union/pdf/competitiveness-report/2011/country_review.pdf. xiv Gómez, M., Rodríguez, J. C. (2014), “Innovation Trends in South Korea,” International Journal of Social, Behavioral, Educational, Economic, Business and Industrial Engineering Vol. 8, No. 9, p. 2990. xv Availability to latest technology score is based on the question: “In your country, to what extent are the latest technologies available?” In the World Economic Forum’s Executive Opinion Survey, 2014–15, where 1 = not at all and 7 = to a great extent (standardized to 100). Source: World Economic Forum (2015); GIPC (2016). xvi World Economic Forum, The Global Information Technology Report 2014: Rewards and Risks of Big Data, Geneva 2014, p. 28, http://www3.weforum.org/docs/WEF_GlobalInformationTechnology_Report_2014.pdf. xvii Ibid., p. 29. xviii OECD (2013), OECD Economic Surveys: Italy 2013, OECD Publishing; Piatkowski, M. (2015), “Poland: Innovations Need the Strong State,” World Bank, November 26, 2015, http://www.worldbank.org/en/news/opinion/2015/11/26/innovations-need-strong-state. xix VOD and streaming services penetration is gauged by responses to the question: “Thinking about the last month have you watched TV programs using VOD and streaming services?” in the Connected Consumer Survey 2014– 2015. Source: Google Consumer Barometer (2015); GIPC (2016). xx InterNations, The German Radio & TV Landscape, http://www.internations.org/germany-expats/guide/16032media-communication/the-german-radio-and-tv-landscape-16007/broadcast-fees-in-germany-2; HIS Newsroom, “Brits Watch Less TV than Ever Before; Italians Watch the Most, IHS Says,” September 2, 2015, http://press.ihs.com/press-release/technology/brits-watchless-tv-ever-italians-watch-most-ihs-says-infographic. xxi Company R&D spending score based on responses to the question “In your country, to what extent do companies spend on research and development?” In the World Economic Forum’s Executive Opinion Survey, 2015–16, where 1 = do not spend on R&D and 7 = spend heavily on R&D (standardized to 100). Source: World Economic Forum (2015); GIPC (2016). xxii The Economist, Coming of Age: Asia’s Evolving R&D Landscape, An Economist Intelligence Unit report, 2012, pp. 4–6, http://www.economistinsights.com/sites/default/files/downloads/Coming%20of%20age%20Asias%20evolving%2 0RnD%20landscape_WEB.pdf. xxiii Bin Byat, A., Sultan, O. (2014), “The United Arab Emirates: Fostering a Unique Innovation Ecosystem for a Knowledge-Based Economy,” in The Global Innovation Index 2014, pp. 101–11, WIPO, INSEAD, Cornell. xxiv ILOSTAT data not available for Brunei, India, Nigeria, and Taiwan. Source: International Labor Organization ILOSTAT Database, Employment distribution by occupation, ISCO-88 categories 1, 2, and 3 (2015); GIPC (2016). xxv OECD (2014), “Country Profiles: Japan,” in Job Creation and Local Economic Development, OECD Publishing. xxvi Huggins, R., Izushi, H., Prokop, D., Thompson, P. (2013), “Regional Evolution and Waves of Growth: A Knowledge-Based Perspective,” the 6th Knowledge Cities World Summit, p. 155, http://eprints.aston.ac.uk/21374/1/Regional_evolution_and_waves_of_growth.pdf; Milken Institute (2013), “The Future of Higher Education and How America Will Pay for It,” Georgetown University, pp. 1–2, http://assets1c.milkeninstitute.org/assets/Publication/ResearchReport/PDF/PayingforHigher.pdf. xxvii Gimpelson, V. Kapeliushnikov, R. (2014), “Polarization or Upgrading? Evolution of Employment in Transitionary Russia,” IZA Discussion Paper No. 8688, December 2014, http://ftp.iza.org/dp8688.pdf. xxviii Clinical trial intensity is measured as the gross number of clinical trials to date per economy, as registered in clinicaltrials.gov database, standardized per million population; Source: National Institutes of Health, Clinicaltrials.gov; Index (2016). xxix Pugatch Consilium, “Measuring the Global Biomedical Pulse: The Biopharmaceutical Investment & Competitiveness (BCI) Survey—2015.” xxx Tzou, M. C. (2013), “Recent Trend of Pharmaceutical Regulations in Taiwan,” Taiwan Food & Drug Administration. xxxi Chiu, Y. (2013), Conducting Clinical Trials in Japan: A CRO Perspective, Pharmaceutical Product Development.

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