Defending Intellectual Property Rights in the BRIC Economies By Robert C. Bird* Protecting U.S.

intellectual property rights abroad is nowhere more important than in Brazil, Russia, India, and China, collectively known as the BRIC economies. None of these emerging economies have fully developed intellectual property protection and enforcement mechanisms. In all four countries, intellectual property infringement ranges from merely widespread to absolutely rampant. Yet, U.S. firms cannot afford to ignore the market opportunities in these rapidly growing nations. This presents an obvious quandary how can U.S. companies remain competitive in developing countries such as the BRICs while still protecting their intellectual property rights? The goal of this article is to help answer this question. This question holds particular importance in light of a 2003 study titled Dreaming with BRICs: The Path to 2050, published by Goldman Sachs.1 This paper examined growth projections of the BRIC economies from the present date to 2050 relative to long-term projections of the G6, the G8s immediate predecessor.2 The authors applied demographic projections and a model of capital accumulation and productivity growth to make their predictions.3 The results were startling. In less than forty years, the BRIC economies collectively could be larger than the G6 in US dollar terms.4 Indias economy could be larger than all nations except the United States and China in as little as thirty years.5 China may overtake Germany in economic size within four years, Japan within ten years, and the United States within thirty five years.6 India may grow at the rate of five percent per year for the next thirty years.7 By 2050, only the United States and Japan may be left among the current largest six economies in the world. 8

Assistant Professor, University of Connecticut. I would like to thank Subhash Jain and the University of Connecticuts Center for International Business Education and Research for funding to support the completion of this article. My thanks are given for the comments and support of the attendees of the BRIC Conference held at the University of Connecticut in April, 2005. I appreciate comments and support from Dan Cahoy and Leigh Anenson. I gratefully acknowledge research assistance from Christophe Pane and Anne Taylor. An earlier version of this article is forthcoming in a chapter of a book edited by Subhash Jain. I welcome comments at robert.bird@uconn.edu. All errors and omissions are my own. 1 Dominic Wilson & Roopa Purushothaman, Dreaming with BRICs: The Path to 2050 (Goldman Sachs, Global Economics Paper No. 99, 2003) at http://www.gs.com/insight/research/reports/99.pdf. 2 Id. at 3. Members of the G6 are generally believed to be the United States, Japan, Germany, France, Italy, and the United Kingdom. For more information on the G8, which includes the G6 plus Canada and Russia, see Profile: G8, http://news.bbc.co.uk/1/hi/world/americas/country_profiles/3777557.stm; G8 Information Centre, http://www.g7.utoronto.ca/. 3 Wilson & Purushothaman, supra note 1, at 3. 4 Id. at 4. 5 Id. 6 Id. 7 Id. 8 Id. at 4.

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Although the BRICs rapid ascendancy is not preordained, it is reasonable to conclude that over the next forty years the BRIC economies will increasingly influence the worlds political, economic, and military balance of power. The rise of BRIC power no doubt has significant implications for the international legal environment. Yet few legal scholarly articles discuss the BRIC economies collectively as an emerging economic force.9 This article focuses on one important legal aspect of the BRIC economic growth the protection of intellectual property rights of U.S. firms in BRIC countries.10 Protection of intellectual property rights ranks for many firms as the single most significant threat to firm competitiveness on a global scale.11 This article is divided into two parts. Part I explores the effectiveness of coercion in protecting intellectual property rights abroad. This Part examines the efforts of the United States to establish intellectual property as a trade issue, develop an international intellectual property regime, and enforce rights of U.S. firms abroad. This Part also discusses U.S. reliance on sanction based measures and the long term effect of these measures on protecting intellectual property rights. This Part concludes that while coercion is sometimes necessary, it is not sufficient to sustain long-term protection of intellectual property rights. Part II of this article examines the efficacy of unilateral initiatives, defined as measures presented to a recipient without immediate expectation of reciprocation, as a component of an intellectual property protection strategy. This Part shows that unilateral initiatives can be an effective part of any negotiating strategy and can make efforts at improving intellectual property right enforcement more effective. This article concludes that unilateral initiatives have been given insufficient attention in intellectual property strategies and should be come a key part of any measure to protect these rights in the BRIC economies. I. Can the United States Coerce the BRICs into Protecting Intellectual Property? Coercion, in the context of international relations, occurs when a stronger nation (S) forces a weaker nation (W) to perform actions that serve the dominant power.12 S states that it will punish W if it fails to take a certain action. S maximizes its payoff when W takes the demanded action. Given Ss statements, W also maximizes its payoff if it takes
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Exceptions to this rule are, for example, Michael Littlewood, Tax Competition: Harmful to Whom?, 26 MICH. J. INTL L. 411, 478 n.278 (2004) and Srividhya Ragavan, The Jekyll and Hyde Story of International Trade: The Supreme Court in Phrma v. Wash and the TRIPS Agreement, 38 U. RICH. L. REV. 777, 824 n.279 (2004). 10 This article examines intellectual property protections in all four BRIC countries, but places extra emphasis on the Chinese economy. The Chinese economy absorbs the most investment from the United States, is studied the most out of the four economies, and has received the greatest attention from the United States regarding intellectual property rights enforcement. As the Chinese economy appears to be the most advanced of the four, discussions of intellectual property in China will be relevant to the other BRICs as Brazil, Russia, and India follow Chinas economic path. 11 Ilkka A. Ronkainen & Jose Luis Guerrero-Cusumano, Correlates of Intellectual Property Violation, 9 MULTINATL BUS. REV. 59, 59 (2001). 12 Jack L. Goldsmith & Eric A. Posner, A Theory of Customary International Law, 66 U. CHI. L. REV. 1113, 1123-24 (1999). This example assumes the cost of punishing the weaker state is negligible.

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the demanded action and is not punished. The optimal conditions for both W and S are that W complies with Ss demands and S does not punish the small state.13 Coercive threats alter Ws behavior. This occurs not by raising the equilibrium benefit of W to follow S but by making the alternative of not performing Ss demanded action less desirable.14 A. The Rise of the Modern Global Intellectual Property Regime: GATT, Trade, and U.S. Pressure to Strengthen Intellectual Property Rights Global intellectual property protection was once largely fragmented and ineffective. During the eighteenth and nineteenth centuries inventors holding patents would have to submit applications in all countries simultaneously where the inventor desired patent protection.15 Failure to do so resulted in nullifying patent protection for all except one of the nations to which the patent was submitted on the grounds that the first applications destroyed the novelty of subsequent applications.16 The lack of global protection became so acute that, during an international exhibition of inventions in Vienna in 1873, inventors refused to participate for fear of losing the patent rights to their inventions.17 Such poor treatment was the norm until the passage of the 1883 Paris Convention for the protection of Industrial Property18 and the 1885 Berne Convention for the Protection of Literary and Artistic Works.19 Among other things, these conventions established the principle of national treatment.20 This national treatment principle required nations to grant foreign patent holders the same rights given its own citizens. These agreements also required signatories to impose basic minimum standards of intellectual property protection. Revised and amended extensively over time, these agreements long remained basic principles of international intellectual property law.21 These landmark conventions and their accompanying principles achieved little in limiting global piracy of intellectual property. Nations still retained enormous discretion in
Id. See also Edward T. Swaine, Rational Custom, 52 DUKE L.J. 559, 576-78 (2002). Peter M. Gerhart, Reflections: Beyond Compliance Theory TRIPS as a Substantive Issue, 32 CASE W. RES. J. INTL L. 357, 369 (2000). 15 Gerald J. Mossinghoff, National Obligations Under Intellectual Property Treaties: The Beginning of a True International Regime, 9 FED. CIR. B.J. 591, 593 (2000). 16 Id. 17 Id. at 594-95 (citing Warren S. Wolfeld, Note, International Patent Cooperation: The Next Step, 16 CORNELL L. REV. 229 (1983)). 18 Paris Convention for the Protection of Industrial Property, as last revised, July 14. 1967, 21 U.S.T. 1583, T.I.A.S. No. 6295, 828 U.N.T.S. 305 [hereinafter Paris Convention]. Belgium, Brazil, France, Guatemala, Italy, the Netherlands, Portugal, Salvador, Servia, Spain, and Switzerland were the original signatories to the Paris Convention. Gregory W. Hotaling, Comment, Ideal Standard v. IHT: In the European Union, Must A Company Surrender its National Trademark Rights When it Assigns a Trademark?, 19 FORDHAM INTL L.J. 1178, 1240 n.365 (1996). 19 Berne Convention for the Protection of Literary and Artistic Works, Sept. 9, 1886, revised at Paris July 24, 1971, 25 U.S.T. 1341, 828 U.N.T.S. 221. [hereinafter Berne Convention] 20 Frank Emmert, Intellectual Property in the Uruguay Round Negotiating Strategies of the Western Industrialized Countries, 11 MICH. J. INTL L. 1317, 1337 (1990). 21 Id. See also Jason Taketa, Note, The Future of Business Method Software Patents in the Intellectual Property System, 75 S. CAL. L. REV. 943, 958 (2002).
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granting intellectual property protections.22 Entire fields of patentable technology, such as pharmaceuticals, biotechnology, and agricultural chemicals, could be excluded from protection.23 Copyrightable documents such as educational materials could also be excluded.24 The duration of patent protection could be so limited as to be minimally effective for rights holders.25 Patentability could even be limited to the process alone and refused for the end product.26 The result was a legal environment in many countries that failed to protect what western nations perceived to be even the most basic of intellectual property rights. This problem and the lack of any real harmonization led to complaints about the Paris and Berne Conventions and the drive to improve their basic standards.27 The failures of global intellectual property protection rose to real prominence in the United States during the 1980s, when executives became concerned with the decline of American competitiveness in manufacturing.28 The rise of technological industries also gave intellectual property enhanced importance.29 The time had come for American business to use its economic and political muscle to encourage other nations to respect their intellectual property rights. American interests began reshaping the modern global intellectual property regime in earnest during the early phases of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT), negotiated between 1986 and 1994. The proposed agenda for this round of negotiations was similar to topics discussed in the past; the improvement of trade in the textiles and apparel, services, agriculture, foreign direct investment, and government procurement arenas.30 Both developed and developing countries had much to gain from the negotiations. Developing countries expected to liberalize trade in textiles and apparel products.31 Developed countries planned to liberalize service and foreign direct investment requirements.32 Intellectual property, although a significant global issue by the mid-1980s, was not an issue on the GATT agenda. The United States sought support from European and Japanese allies to make intellectual property a trade issue.33 The fact that the lack of intellectual property protection spanned patents, copyrights, and trademarks facilitated
Emmert, supra note 20, at 1340. See also Andrew T. Guzman, International Trust and the WTO: The Lesson From Intellectual Property, 43 VA. J. INTL L. 933, 948 (2003). 23 Emmert, supra note 20, at 1340. 24 Id. 25 Id. 26 Id. 27 Guzman, supra note 22, at 948-49. 28 Gerhart, supra note 14, at 367. 29 Id.; Kenneth W. Dam, The Growing Importance of International Protection of Intellectual Property, 21 THE INTL LAWYER, 627, 629 (1987). See generally Ralph Oman, Intellectual Property Our Once and Future Strength, 27 GEO. WASH. J. INTL L. & ECON. 301 (1993-94). 30 Mossinghoff, supra note 15, at 598. 31 Id. 32 Id. 33 Susan K. Sell, Multinational Corporations as Agents of Change: The Globalization of Intellectual Property Rights, in PRIVATE AUTHORITY AND INTERNATIONAL AFFAIRS 169, 183-84 (A.C. Cutler, V. Haufler, & T. Porter eds. 1999).
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the emergence of common interests among disparate companies and organizations.34 The Pharmaceutical Manufacturers Association (PMA), a trade group representing the interest of drug companies, sought to construe intellectual property as a trade issue in their testimony before Congress.35 The International Intellectual Property Alliance (IIPA), an organization dedicated to policing national copyright protection efforts, also played a major role in changing the GATT agenda.36 Large multinational corporations (MNC) formed a cross-industry organization called the Intellectual Property Committee (IPC), representing such corporate luminaries as Merck, Johnson & Johnson, BristolMyers, IBM, Hewlett Packard, General Motors, General Electric, Rockwell International, Du Pont, Monsanto Chemical, and Warner Communications as original members.37 All of these groups and their multinational corporate backers sought to place intellectual property rights at the forefront of international debate. Representatives offered compelling testimony that intellectual property rights were in jeopardy abroad and are a significant issue for international trade. In 1987, a Vice President of IBM argued to Congress, [the fact that] intellectual property has become a trade problem is not surprising, because the source of the problem is the same as that of other trade issues. That is, nations often put domestic priorities first and only later understand that national actions favoring them can seriously erode their own international trade interests.38 A representative of the IPC commented that, intellectual property is important to international competitiveness . . . [and] inadequate international protection of intellectual property has become a major cause of distortions in the international trading system. . . . The IPC believes that it is both appropriate and necessary for intellectual property issues to be deal with under international trade rules as a supplement to existing international intellectual property conventions and agreements.39 These interests also targeted developing countries for special scrutiny. For example, the President of the PMA testified before Congress that, [a]ll [developing countries] have significant deficiencies in intellectual property protection for pharmaceuticals, the correct of which would substantially improve the market share for U.S. pharmaceutical companies.40

Mohamed Omar Gad, Impact of Multinational Enterprises on Multilateral Rulemaking: The Pharmaceutical Industry and the TRIPS Uruguay Round Negotiations, 9 L. & BUS. REV. AM. 667, 674 (2003). 35 Id. at 675. 36 Id. at 674 n.32. 37 Edmund J. Pratt, Intellectual Property, at http://www.pfizer.com/pfizer/about_public/mn_about_intellectualpropfrm.jsp. Edmund Pratt, Chairman Emeritus of Pfizer, also stated that, [t]he committee helped convince U.S. officials that we should take a tough stance on intellectual property issues, and that led to trade-related intellectual property rights being included on the GATT agenda[.] Id. 38 Dam, supra note 29, at 630. 39 Gad, supra note 34, at 676. 40 Id. at 675. For a useful summary of the PMAs position during this era, see Gerald J. Mossinghoff, Research-Based Pharmaceutical Companies: The Need for Improved Patent Protection Worldwide, 2 J. L. & TECH. 307 (1987). Gerald Mossinghoff was the President of the PMA at the time of the publication of this article. Id. at fn. aa1.

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Developing countries, led by BRIC nations India and Brazil, resisted American efforts to link trade and intellectual property at GATT and improve intellectual property protections.41 They argued that discussion of intellectual property rights exceeded GATTs original mandate.42 They further responded that developing nations were able to achieve their current development levels in part because they were unrestricted by intellectual property rules.43 If developing countries accepted strong intellectual property restrictions, they argued, there would be less of an opportunity to catch up to more advanced nations and the gap between rich and poor would continue to expand.44 Instead, developing countries preferred the World Intellectual Property Organization (WIPO) as the appropriate forum because it provided one nation, one vote decision making.45 Developing countries, which made up more than half of WIPO members, could then effectively block any changes to intellectual property standards.46 Developing countries struggled to keep WIPO as the appropriate forum for intellectual property regulation. India, for example, endured enormous pressure and actively resisted American efforts to introduce intellectual property into GATT. With a strong local manufacturing industry of generic drugs and other products, India initially refused to even discuss the possibility of including patent protection in any GATT agreement during the first three years of negotiations. Debate on this issue dragged on until 1989, three years after the Uruguay GATT Round of negotiations began.47 By 1989, most of Indias allies (including Brazil, which had succumbed to U.S. threats of trade sanctions) had grudgingly accepted intellectual property as a trade issue and agreed to discuss its improvement in the GATT forum.48 Ultimately, under significant economic pressure from the United States, India relented and accepted discussion of intellectual property on the GATT agenda.49 The subsequent agreement, which would become known as the Trade Related Aspects of Intellectual Property Rights agreement or TRIPS, was signed in 1994.50 This agreement
Gerhart, supra note 14, at 369 n.30. Elizabeth Chien-Hale, Asserting U.S. Intellectual Property Rights in China: Expansion of Extraterritorial Jurisdiction?, 44 J. COPYRIGHT SOCY U.S.A. 198, 226 (1997). 43 Id. 44 Id. 45 Lee Petherbridge, Intelligent TRIPS Implementation: A Strategy for Countries on the Cusp of Development, 25 U. PA. J. INTL ECON. L. 1133, 1135 n.11 (2004). 46 Id. 47 C. ONeal Taylor, Linkage and Rule-Making: Observations on Trade and Investment and Trade and Labor, 19 U. PA. J. INTL ECON. L. 639, 668 n.114 (1998). 48 George K. Foster, Opposing Forces in a Revolution in International Patent Protection: The U.S. and India in the Uruguay Round and its Aftermath, 3 UCLA J. INTL & FOREIGN AFF. 283, 315 (1998). 49 Id. 50 Agreement on Trade-Related Aspects of Intellectual Property Rights, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1C, Legal Instruments Results of the Uruguay Round, 33 I.L.M. 81 (1994). [hereinafter TRIPS]. See also Donald P. Harris, TRIPS Rebound: An Historical Analysis of How the TRIPS Agreement can Ricochet Back Against the United States, 25 NW. J. INTL L. & BUS. 99 (2004) (discussing TRIPS). The TRIPS agreement, which implements sweeping protections to intellectual property rights on a global scale, has been hailed as the most important international law governing intellectual property rights. Susan K. Sell, What Role for Humanitarian Intellectual Property? The Globalization of Intellectual Property Rights, 6 MINN. J.L. SCI & TECH. 191,
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provided broad sweeping protections for intellectual property rights, offered favored nation treatment for all signatories, granted minimum terms of protection, imposed significant local enforcement and dispute settlement procedures, and even authorized trade sanctions against non-compliant nations.51 Nothing like it had ever been seen before in the global intellectual property arena. This landmark agreement, which was without question the grandest event in commercial diplomatic history,52 would have been unthinkable without the concerted efforts of U.S.-based corporate executives.53 Meanwhile, American multinational interests advocated for augmenting domestic legislation that would coerce developing countries into adopting a more hospitable trade policy. Indeed, U.S. law already had strong coercive legislation in place under Section 301 of the Trade Act of 1974.54 While the stated purposes of the 1974 Trade Act appear fairly benign,55 it contains significant offensive measures to ensure trade compliance and to prevent what the U.S. perceives to be unfair competition. Section 301 grants the President broad authority to impose sanctions against a priority foreign country56 that threatens U.S. economic interests or engages in unfair trade practices.57 Section 301(a) authorizes retaliation against a nation who has breached a trade agreement with the United States.58 Section 301(b) authorizes retaliation against a nation whose actions
191 (2004). See also Xuan-Thao N. Nguyen, Nationalizing Trademarks: A New International Trademark Jurisprudence?, 39 WAKE FOREST L. REV. 729, 761 (2004) (similar); Martin J. Adelman & Sonia Baldia, Patentable Inventions: Prospects of Limits of the Patent Provision in the TRIPS Agreement: The Case of India, 29 VAND. J. TRANSNATL L. 507, 512 (1996) (The importance of TRIPS cannot be easily overemphasized.). 51 For one of many useful articles summarizing TRIPS see Robert J. Gutowski, Comment, The Marriage of Intellectual Property and International Trade in the TRIPS Agreement: Strange Bedfellows or a Match Made in Heaven?, 47 BUFF. L. REV. 713 (1999). 52 Foster, supra note 48, at 283 (citing ERNEST H. PREEG, TRADERS IN A BRAVE NEW WORLD: THE URUGUAY ROUND AND THE FUTURE OF THE INTERNATIONAL TRADING SYSTEM xi (1995)). 53 Sell, supra note 33, at 170. 54 Trade Act of 1974 301, Pub. L. No. 93-618, 88 Stat. 2041 (1975) (codified as amended at 19 U.S.C. 2411 (2005)). 55 The professed purposes of the 1974 Trade Act are: (1) to foster the economic growth of and full employment in the United States and to strengthen economic relations between the United States and foreign countries through open and nondiscriminatory world trade; (2) to harmonize, reduce, and eliminate barriers to trade on a basis which assures substantially equivalent competitive opportunities for the commerce of the United States; (3) to establish fairness and equity in international trading relations, including reform of the General Agreement on Tariffs and Trade; (4) to provide adequate procedures to safeguard American industry and labor against unfair or injurious import competition, and to assist industries, firm, workers, and communities to adjust to changes in international trade flows; (5) to open up market opportunities for United States commerce in nonmarket economies; and (6) to provide fair and reasonable access to products of less developed countries in the United States market. 19 U.S.C. 2102 (2005). 56 The process of identifying of a priority foreign country is codified at 19 U.S.C. 2242 (2005). 57 See Peter K. Yu, From Pirates to Partners: Protecting Intellectual Property in China in the Twenty-First Century, 50 AM. U. L. REV. 131, 139 n.37 (2000). 58 19 U.S.C. 2411(a)(1)(A) (2005).

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burden or restrict United States commerce.59 The Section 301 power arose from Congressional dissatisfaction with the lack of protection U.S. trade was receiving under the then current GATT regime.60 Ostensibly dissatisfied with the results of the 1974 Trade Act, Congress passed the Omnibus Trade and Competitiveness Act (OTCA) in 1988.61 The OTCA amended Section 301 by adding two new weapons to the governments legislative arsenal Super 301 and Special 301. This newly augmented Special 301, characterized as probably the most criticized piece of U.S. foreign trade legislation since the Hawley-Smoot Tariff Act of 1930,62 required the United States Trade Representative (USTR) through the Super 301 provision to review U.S. trade priorities and cite priority foreign country practices that pose major barriers to U.S. exports.63 Special 301, by contrast, focuses specifically on unfair intellectual property rights practices.64 Special 301 required the United States Trade Representative (USTR)65 to identify nations that provide weak intellectual property protection or deny U.S. intellectual property goods fair or equitable market access.66 The OTCA placed strict time limits on how long before the USTR must act against a country that has been cited as an offender against U.S. trade interests.67 Upon such
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19 U.S.C. 2411(a)(1)(B)(ii) (2005). Kim Newby, The Effectiveness of Special 301 in Creating Long Term Copyright Protection for U.S. Companies Overseas, 21 SYRACUSE J. INT'L L. & COM. 29, 33 (1995). The congressional Senate Report reviewing the act stated: In addition, the Committee felt that there would be situations, such as in the case of unreasonable foreign import restrictions where the President ought to be able to act or threaten to act under section 301, whether or not such action would be entirely consistent with the General Agreement on Tariffs and Trade. Many GATT articles, such as Article I (MFN principle) Article III (taxes affecting imports), Article XII (balance of payments safeguards), or Article XXIV (regional trade associations) are either inappropriate in today's economic world or are being observed more often in the breach, to the detriment of the United States. Furthermore, the decision-making process under the General Agreement often frustrates the ability of the United States (as well as other contracting parties) to obtain the decisions needed to enable the United States to protect its rights and benefits under the GATT. . . . The Committee is not urging that the United States undertake wanton or reckless retaliatory action under section 301 in total disdain of applicable international agreements. However, the Committee felt it was necessary to make it clear that the President could act to protect U.S. economic interests whether or not such action was consistent with the articles of an outmoded international agreement initiated by the Executive 25 years ago and never approved by the Congress. S. REP. NO. 1298, 93d Cong., 2d Sess. (1974), reprinted in 1974 U.S.C.C.A.N. 7186, 7304. 19 U.S.C. 2101-2495 (2005). 62 Yu, supra note 57, at 139 n.39 (quoting Robert E Hudec, Thinking About the New Section 301: Beyond Good and Evil, in AGGRESSIVE UNILATERALISM: AMERICAS 301 TRADE POLICY AND THE WORLD TRADING SYSTEM 113 (Jagdish Bhagwati & Hugh T. Patrick eds., 1990)). 63 Yu, supra note 57, at 139. 64 Id. at 139-40. 65 The OTCA removed retaliation and investigation powers from the President and placed them with the United States Trade Representative. Newby, supra note 60, at 34. 66 Yu, supra note 57, at 140. 67 Jared R. Silverman, Multilateral Resolution Over Unilateral Retaliation: Adjudicating the use of Section 301 Before the WTO, 17 U. PA. J. INTL ECON. L. 233, 246 (1996) (citing 19 U.S.C. 2412-13 (1988)).
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identification, the USTR must initiate an investigation within thirty days and request a consultation regarding that nations improper practices.68 If the issue is not resolved to the USTRs satisfaction within six months for most issues, the USTR is authorized to suspend or withdraw trade benefits and impose duties or other penalties.69 The United States did not hesitate to use its newly augmented trade enforcement powers against the BRICs. Indeed, all four BRIC economies have endured U.S. political and economic pressure to change or improve their intellectual property protection practices. Brazil, for example, became the direct target of PMA efforts to protect their intellectual property abroad. In 1987, the PMA filed a petition with the USTR claiming that Brazils denial of patent protection for pharmaceutical products and processes adversely affected its member companies by harming their patent rights, eroding their Brazilian investments, threatening their exports to Brazil, and eliminating opportunities for further investment and trade in the Brazilian economy.70 The PMA estimated past and potential losses for its members in the hundreds of millions of dollars.71 The petition sought not only to curb Brazilian behavior but to send a signal that nations opposed to new rise in intellectual property protections would face the PMAs stiff resolve. The PMA characterized Brazil as a leader of developing countries whose purpose was to dilute even the most basic minimum standards provided by the Paris Convention.72 As a result, Brazil was one of the first nations to suffer direct sanctions from Special 301. On October 20, 1988, President Reagan issued proclamation 5885, increasing U.S. import duties on certain Brazilian products by one hundred percent.73 The PMA commented that [w]e hope the imposition of this sanction, which is modest in comparison to the revenue losses sustained by our industry in Brazil, will impress upon Brazil the seriousness with which the United States views the unauthorized appropriation of its citizens intellectual property.74 The sanctions impacted $200 million in trade.75 Only the Brazilian governments announcement one year later that it would seek improved patent protection

Yu, supra note 57, at 140. Id. 70 Gad, supra note 34, at 682. 71 Id. 72 Id. at 684. Gad quotes a statement by Gerald J. Mossinghoff, then President of the PMA, as stating:
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Brazil is a leader of the so-called G-77 countries effort to reduce the already minimum standards for patent protection in the Paris Convention. It has also opposed efforts to include intellectual property protection within the purview of the GATT as a trade related issue. As a newly industrialized nation, it is time for Brazil, the eighth largest economy in the west, to start playing by the rules of the international trading system. Statement of Gerald J. Mossinghoff, President, PMA, in Brazil Pharaceutical Patents, USTR Public Docket No. 301-61. 73 Increase in the Rates of Duty for Certain Articles from Brazil, Proclamation No. 5885, 53 FED. REG. 41,551 (Oct. 20, 1988). See also Myles Getlan, TRIPS and the Future of Section 301: Cases Dealing with the Protection of Intellectual Property Rights, 34 COLUM. J. TRANSATL L. 173, 185 (1995). 74 Gad, supra note 34, at 678. 75 Id. at 684.

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legislation for pharmaceutical products and processes caused the U.S. government to lift the sanctions.76 In addition, Russia was also pressured by the United States to improve its intellectual property regime, albeit on a more limited scale. The USTR placed Russia on its Watch List in 1995 and its Priority Watch List in 1997,77 obviously signifying non-compliance with key intellectual property standards.78 The U.S. government pressured the Soviet Union to join the Berne Convention in exchange for preferential trade status.79 The motion picture industry, led by its then president Jack Valenti, successfully lobbied for Congress to withhold ratification of the agreement until the Soviets improved their copyright laws in order to illegalize piracy of U.S. films.80 After the collapse of the Soviet Union, the Russian government assumed the responsibilities of the agreement. The United States pressured India to agree to the development and enforcement of TRIPS. In 1989, India suffered an economic crisis which required the government to ask for International Monetary Fund (IMF) assistance.81 The United States has significant influence over IMF policies.82 Furthermore, the United States had been providing India with needed direct grants and served as Indias largest trading partner.83 The United States had already fired a warning shot by revoking duty-free treatment of India pharmaceutical exports, costing Indian exports $60 million.84 Based upon the cumulative effect of these economic factors, India had no choice but to relent on its opposition to the developing agreement in order to maintain badly needed U.S. funding and trade access.85 The Indian government relented even though it was subjected to relentless lobbying from Indian farmers and drug manufacturers to do otherwise.86 Finally, U.S. pressure on China almost resulted in a series of trade wars. During the 1990s the United States repeatedly threatened to impose sanctions against China for its failure to protect American intellectual property rights. China would agree to improve and enforce its intellectual property laws and the United States would agree to not impose sanctions.87 Although the United States and the interests that supported it lobbied heavily
Determination to Terminate Increased Duties on Certain Articles from Brazil, 55 FED. REG. 27,324 (July 2, 1990). 77 See Lianlian Lin, Intellectual Property Protection in China, 27 ACAD. LEGAL STUD. BUS. NATL PROC. 203, 205 (1998) ([The] USTR prepares a list of countries, ranked from priority foreign country, a country with the most egregious IPR problems, to priority watch list, and to watch list, a country that still warrant [sic] monitoring.). 78 Connie Neigel, Piracy in Russia and China: A Different U.S. Reaction, 53 LAW & CONTEMP. PROBS. 179, 188 (2000). See also Tim Kuik, Piracy in Russia: An Epidemic, 20 WHITTIER L. REV. 831 (1999). 79 Neigel, supra note 78, at 185. 80 Lana C. Fleishman, The Empire Strikes Back: The Influence of the United States Motion Picture Industry on Russian Copyright Law, 26 CORNELL INTL L.J. 189, 215-22 (1993). 81 Foster, supra note 48, at 316. 82 Id. 83 Id. at 317. 84 Id. 85 Id. at 316-17. 86 Id. at 309-13. 87 These efforts by the United States to induce China to respect intellectual property rights are discussed more fully in Part I.D.1.
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to improve intellectual property protections, the result of these efforts, as the next section will show, were decidedly mixed in nature. B. What are the Results of American Coercion of BRICs? As Part A reveals, all four BRIC economies have endured American governmental pressure to improve their intellectual property regimes. Brazil faced overwhelming pharmaceutical industry pressure and governmental threats of sanctions from the United States to improve its patent protection for drug products and processes. Brazil gave up its resistance to discussing intellectual property rights at GATT, joined the TRIPS agreement, and now possesses a functioning patent approval system and legislation that is at least fairly consistent with the minimum standards protection required by TRIPS.88 Russia endured motion picture industry backed lobbying by the United States to join the Berne Convention and improve its intellectual property laws or else potentially lose Most Favored Nation trade status with the United States. In response, the former Soviet republic enacted intellectual property laws protecting computer programs, databases, and integrated circuit topologies.89 In 1993, Russia enacted a comprehensive copyright law.90 India faced the prospect of overwhelming trade penalties and aid losses if it did not improve its intellectual property policies. Even in spite of enormous political pressure from farmers and domestic generic drug consumers,91 India acceded to sweeping changes of TRIPS. India also has passed legislation establishing a mailbox system to receive patent applications, protecting geographic indication trademarks, and strengthening copyright law.92 Finally, China resisted U.S. efforts to change its domestic piracy practices, even threatening retaliations in what could have been a devastating trade war for both countries. Just hours before a trade war would have commenced, China agreed to U.S. demands and halted some of its most egregious domestic acts of piracy. Today, Chinese intellectual property law resembles developed nations legal codes. Since Chinas accession to TRIPS, it has extended patent protection from fifteen to twenty years, protected geographic indication trademarks, and offered the right of judicial review to administrative decisions of the Trademark Review and Adjudication Board.93 These changes in BRIC governments intellectual property policy show that coercive action by the United States government has changed the legal landscape in these nations. All four BRICs developed stronger intellectual property laws as a result of American
See generally Claudia Schulz, The TRIPS Agreement and Intellectual Property in Brazil, 98 AM. SOCY INTL PROC. 100 (2004). 89 Neigel, supra note 78, at 186. 90 Id. at 185. 91 Foster, supra note 48, at 309-10. 92 Embassy of India Policy Statements, Intellectual Property Rights in India, at http://www.indianembassy.org/policy/ipr/ipr_2000.htm. 93 See generally Veronica Weinstein & Dennis Fernandez, Recent Developments in Chinese Intellectual Property Laws, 3 CHIN. J. INTL L. 227 (2004).
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intervention. Successful enforcement of these new laws, however, is a different matter altogether. The success of enforcing intellectual property law in the BRIC countries is thoroughly described in an annual report published by the International Intellectual Property Alliance (IIPA), a coalition of private-sector interests formed to represent copyright-based industries in improving copyright protection on a global scale.94 The IIPA also influences the USTRs Section 301 reviews and, among other activities, participates in discussions with the World Intellectual Property Organization (WIPO) regarding intellectual property rights.95 Most importantly for purposes of this paper, the IIPA tracks intellectual property regimes and enforcement in over eighty countries around the world.96 The IIPAs annual country reports are significantly useful in understanding the enforcement of intellectual property rights globally. Although the IIPA focuses primarily on copyright piracy, their reports offer a uniquely detailed commentary that is at least somewhat instructive on the level of intellectual property protection generally in the BRIC economies.97 The picture that the IIPA paints of the BRIC countries is bleak indeed. Government action in Brazil, for example, against illegal copying of academic books and other materials is simply non-existent.98 Piracy of copyrighted recordings constitutes over half of all compact disc sales in Brazil.99 Seventy four percent of all video games sold in Brazil are pirated.100 While civil actions are being pursued against some pirates, these actions are almost ineffective because Brazilian disputes take years to be adjudicated
See Description of the IIPA, www.iipa.com/aboutiipa.html. Id. 96 Id. 97 Trademark infringement, for example, is widespread in all four BRICs. One 1995 study examining the trademark protection losses in the footwear and apparel industry estimated the percentage of lost sales to trademark piracy was 26%, 28%, 28%, and 26% for Brazil, Russia, India, and China respectively. See The Economic Impact of Trademark Infringement: Estimation of the Impact of Trademark Counterfeiting and Infringment on Worldwide Sales of Apparel and Footwear 13-14, at http://http://www.inta.org/downloads/tap_economicimpact1998.pdf. In China, stage agencies report 51,851 prosecuted trademark cases in China in 2004, a 27% increase in such cases from the prior year. E.g., Trademark Infringement Cases on the Rise in 2004, 32 CHINA BUS. REV. 62, 62 (May/June 2005). Chinese agencies confiscated and destroyed tons of illegally trademarked material and issued fines totaling $32.4 million. Id. Yet, the USTR has expressed concern that foreign trademark owners do not appear to be receiving national treatment with regard to their well-known marks. See USTR 2003 Special 301 Report 10, at http://www.ustr.gov/assets/Document_Library/Reports_Publications/2003/2003_Special_301_Report/asset _upload_file665_6124.pdf. Brazils National Institute of Industrial Property has increased its enforcement efforts to stop trademark piracy. Brazil: Licensing and Intellectual Property, EIV ViewsWire New York, Sep. 1, 2004 (calling trademark piracy in Brazil a problem and noting weaknesses in Brazilian trademark law). See generally James K. Glassman, Get Tough With Axis of Evil Job Stealers, Det. News, Apr. 12, 2005, at http://www.detnews.com/2005/editorial/0504/14/A11-147213.htm (referring to James Pinkertons classification of Brazil, India, and China as the IP Axis of Evil due to widespread violation of U.S. intellectual property rights). 98 International Intellectual Property Alliance, 2005 Special 301 Report: Brazil 51, 56, at http://www.iipa.com/rbc/2005/2005SPEC301BRAZIL.pdf [hereinafter Brazil IIPA Report] 99 Id. at 54. 100 Id. at 55.
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through the legal system.101 Organized crime in Brazil participates heavily in and benefits significantly from pirating activities.102 Brazils ineffective, non-criminal judicial mechanisms plague the enforcement of intellectual property rights.103 Penalties issued by courts against violators tend to be so small that they do not act as a deterrent against future acts.104 Brazilian copyright piracy caused $931.9 million in trade losses in 2004.105 Russian copyright piracy remains one of the most serious of any country in the world.106 Russia is now one of the largest producers and distributors of illegal optical media material.107 The majority of audio and CDs sold in Russia are pirated copies.108 Crime syndicates thrive off of sales of illegal products.109 Enforcement of Russian intellectual property laws is anemic at best, constituted the weakest link in the Russian copyright system.110 Russian authorities do not conduct surprise inspections, do not seize and confiscate equipment, and rarely repeal issuances of appropriate licenses.111 Jail sentences for piracy are rare.112 Russian copyright piracy exceeded $1.7 billion in 2004.113 India, like Russia and Brazil, suffers from both high piracy rates and a weak enforcement system.114 Legitimate recording industries report rapidly declining sales of products.115 Eighty-six percent of entertainment software sold is pirated.116 Enforcement of intellectual property laws is almost non-existent. Booksellers operate openly in market bazaars with no threat from law enforcement.117 While criminal cases have been commenced, they proceed at a glacial pace through Indian courts.118 The IIPA has only been able to discern no more than 15 criminal convictions for copyright piracy in 15 years.119 When enforcement does occur, small fines and few jail terms are common.120 Almost $500 million in trade losses are attributed to copyright piracy in India in 2004.121
Id. at 55. Id. at 57-58. 103 Id. at 51. 104 Id. at 61-62. 105 Id. at 53. 106 International Intellectual Property Alliance, 2005 Special 301 Report: Russian Federation 13, 13, at http://www.iipa.com/rbc/2005/2005SPEC301RUSSIA.pdf [hereinafter Russia IIPA Report] 107 Id. at 13. 108 Id. at 21. 109 Id. at 20-21. 110 Id. at 22. 111 Id. at 17. 112 Id. at 21. 113 Id. at 13. 114 International Intellectual Property Alliance, 2005 Special 301 Report: Russia 121, 121, at http://www.iipa.com/rbc/2005/2005SPEC301India.pdf. [hereinafter India IIPA Report] 115 Id. at 126. 116 Id. 117 Id. at 123. 118 Id. at 128. 119 Id. at 127. 120 Id. at 128. 121 Id. at 123.
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The sheer volume of copyright piracy in China is staggering. Piracy levels remain at an unimaginable ninety percent across all copyright sectors.122 Significant Chinese trade barriers limit a foreign firms ability to operate profitably in China and satisfy consumer demand, thereby driving up the demand for Chinese manufactured pirated goods.123 At least eighty-three manufacturing plants operate in China with 765 production lines that specialize in the manufacture of pirated goods.124 Although the Supreme Judicial Court of China has recently issued new interpretations of the Chinese Criminal law, it is questionable whether these new interpretations will make any practical difference in reducing piracy.125 Chinese copyright piracy amounted to a whopping $2.5 billon dollar industry in 2004.126 This is not to say that enforcement efforts in the BRICs are completely absent, however. According to the IIPA, Brazilian, Russian, Indian and Chinese officials have all engaged in at least some efforts to curb piracy. For example, authorities in Brazil arrested notorious piracy leader Law Kim Chong and seized millions of blank optical media127 Brazilian and Indian authorities have raided large plants specializing in piracy of optical media.128 The Chinese government is making headway in reducing print journal piracy and bringing successful civil cases under recent Copyright Act amendments.129 Russian authorities conducted a series of raids against optical disc plants and seized illegal materials.130 Yet, in all four nations piracy remains rampant and increasingly prevalent despite years of U.S. foreign policy efforts to stop it. C. The Limitations of Coercion American threats of trade sanctions against the BRICs resulted in significant changes to domestic and international laws. Coercion placed intellectual property on the GATT agenda in spite of fierce resistance from developing countries. Threats of a trade war encouraged China to enact more stringent copyright laws and close pirating factories. Russia improved its copyright laws under threat from Congress to withhold ratification of a trade agreement granting Russia preferential trade status. Economic pressure forced India to accede to the intellectual property standards of TRIPS. American economic threats pressured Brazil to agree to protect U.S. pharmaceutical products and processes at the expense of local producers. Coercion, therefore, can accomplish change in global intellectual property standards.

International Intellectual Property Alliance, 2005 Special 301 Report: China 183, 183, at http://www.iipa.com/rbc/2005/2005SPEC301PRCrev.pdf [hereinafter China IIPA Report] 123 Id. at 210. 124 Id. at 187. 125 Id. at 204. 126 Id. at 186. 127 Brazil IIPA Report, supra note 98, at 57-58. Brazilian authorities alleged that Chong attempted to bribe the Chairman of Brazils Congressional Anti-Piracy Committee. Id. at 57. 128 Russia IIPA Report, supra note 106, at 17; India IIPA Report, supra note 114, at 127. 129 China IIPA Report, supra note 122, at 193, 202. 130 Russia IIPA Report, supra note 106, at 17-18.

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Coercion as a dominant long-term strategy, however, cannot eliminate infringement. Illegal reproduction of protected goods and works in the BRIC economies remains commonplace. The expansion of broadband networks and access to technology by BRIC citizens will only increase the opportunity for pirated products to spread. The demand for illicitly manufactured pharmaceuticals and other patented products remains strong. Although some laws are in place, enforcement remains lax. Coercion as a dominant U.S. political strategy has failed to curb global intellectual property piracy.131 In fact, scant evidence exists that unilateral economic sanctions by the United States regularly achieve their stated long-term policy objectives.132 One author who studied twenty inter-nation crises between 1905 and 1971, including conflicts associated with the Second World War, the First World War, and the Cold War, concluded unequivocally that, if our results suggest anything, it is that an assertive, bullying, strategy is both less effective and more risky than much of the folklore of power policies would have it.133 There are at least six reasons why coercive tactics against foreign states not only fail to achieve their long-term policy objectives but can actually harm U.S. competitiveness. The first and probably the most obvious reason is that coercion provokes retaliation by the targeted state.134 For example, when the United States threatened to impose sanctions against China because of its lack of protection for intellectual property, China responded by ordering twenty Airbus plans worth $1.5 billion from the European company instead of Boeing planes from the United States.135 Indeed, China and the United States have participated in a continuous cycle of threats of sanctions, negotiation and resolutions, and new threats of sanctions for a number of years.136 China has shown that it will not hesitate to threaten debilitating countersanctions when it feels its sovereignty or national dignity has been threatened by American demands for increased intellectual property enforcement.137 There is little doubt that when Brazil, Russia, and India gain sufficient economic power, they will not hesitate to respond similarly. Second, economic sanctions that benefit one U.S. industry can cause damage to another, unrelated U.S. sector. For example, drug companies in the 1980s cited Brazil for its failure to provide intellectual property rights for patents in the pharmaceutical sector.138 After continued negotiations between Brazilian and United States representatives proved unfruitful, the United States imposed economic sanctions against numerous Brazilian products, including paper products, pharmaceuticals, chemicals, microwave ovens,
E.g., Yu, supra note 57, at 172 (discussing China and concluding that [a]part from the lukewarm responses it was able to elicit, the coercive American foreign intellectual property policy failed to create any sustainable and continuous protection for American products.). 132 Justin D. Stalls, Economic Sanctions, 11 U. MIAMI INTL & COMP. L. REV. 115, 148 (2003) (citing various sources and concluding that, [n]early all scholarly analyses conclude that economic sanctions are generally unsuccessful.). 133 Russell J. Leng & Hugh C. Wheeler, Influence Strategies, Success, and War, 23 J. CONFLICT RES. 655, 681 (1979). 134 Yu, supra note 57, at 166-67 (citing ADAM SMITH, THE WEALTH OF NATIONS bk. I, ch. 8, at 434 (Edwin Cannan ed., 1937) (1776)). 135 Id. at 168. 136 See infra Part I.D.1. 137 Yu, supra note 57, at 144. 138 Getlan, supra note 73, at 185.
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television cameras, telephone answering machines, tape recorders, moccasins, pistols, and jewelry.139 Once the government announced trade sanctions, General Electric protested the tariffs against imported electrical breakers, Xerox opposed the inclusion of copy paper, Dow Chemical objected to the tariffs on carbon tetrachloride, Ford Motor called for the removal of amplifiers and windshield wipers, and Carrier sought the removal of air conditioners from the tariffs target list.140 Each of these companies claimed that the sanctions harmed their economic interests because they relied on the importation of the targeted products to satisfy consumer needs.141 Third, economic coercion isolates the coercive country from its trading partners.142 Trading partners who witness American coercion applied against another country naturally will reflect on when such sanctions will be applied against themselves.143 As a result, non-coerced trading partners will be less likely to trust the United States to maintain a harmonious relationship without relying upon unilateral sanctions the moment a dispute arises.144 Liberal use of coercive sanctions in the past will make forging trade agreements with future partners all the more difficult, decreasing the competitiveness of U.S. firms relative to their foreign counterparts. Fourth, sanctions help mobilize resistance against and generate hostility toward the sanctioning state. For example, in 1996, the U.S. Congress passed the highly controversial Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996, also known as the Helms-Burton Act, which punished foreign nationals and foreign companies that do business with Cuba.145 While the Act was intended to destabilize the Cuban government, the act actually weakened internal opposition to Fidel Castros regime. According to a United Nations report, Helms-Burton strengthened support for Castro in Cuba, and thus against the United States, because the Act gave the appearance
Id. at 188. Christopher Scott Harrison, Comment, Protection of Pharmaceuticals as a Foreign Policy: The Canada-U.S. Trade Agreement and Bill C-22 Versus the North American Free Trade Agreement, 26 N.C. J. INT'L L. & COM. REG. 457, 484 n.144 (2001). See also Getlan, supra note 73, at 189 n.90; Administration Opens Hearings on Proposed Sanctions in Brazilian Pharmaceuticals Case, 5 INTL TRADE REP. (BNA) 1247, 1247 (1988). 141 Harrison, supra note 140, at 484 n.144. See also Sanctions Hurt U.S. Hong Kong Firms More than China, Executives Say, 9 INT'L TRADE REP. 56, 56-57 (1992) (noting that manufacturers and importers of appliances, electronic goods, magnets, and antibiotics objected to the use of punitive tariffs as a means of punishing China because the decreases in sales as a result of higher prices would lead to the loss of 39,000 jobs.). 142 Peter K. Yu, Toward a Nonzero-Sum Approach to Resolving Global Intellectual Property Disputes: What we can Learn from Mediators, Business Strategists, and International Relations Theorists, 70 U. CIN. L. REV. 569, 579 (2002). 143 David Hartridge & Arvind Subramanian, Intellectual Property Rights: The Issues in GATT, 22 VAND. J. TRANSNATL L. 893, 909 (1989) (It is indeed hard to see why many states should accept new multilateral commitments in [the intellectual property] area if they remain vulnerable to unilateral actions.). 144 David T. Shapiro, Note, Be Careful What you Wish for: U.S. Politics and the Future of the National Security Exception to the GATT, 31 GEO. WASH. J. INTL L. & ECON. 97, 114 (1997) (Unilateral sanctions also hurt U.S. interests by undermining the stability of the international trading system upon which businesses rely. Foreign countries or companies contemplating a long-term commercial relationship with a U.S. exporter must consider the possibility that U.S. foreign policy considerations may interfere.). 145 22 U.S.C. 6021-6091 (2005). See also Shapiro, supra note 144, at 99.
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that outsiders, rather than Cubans, would decide the nations future.146 The legislatures of the EU, Mexico, and Canada passed retaliatory legislation banning companies operating in their countries from obeying the Helms-Burton Act.147 Similarly, in 1992 the United States successfully pressured the International Whaling Commission to send back for further study a scientific report that recommended the reinstitution of limited commercial whaling based upon the presence of large and increasing whale stocks.148 The effect was to extend the moratorium on commercial whaling for another year.149 Once active commercial whaling nations aggressively reasserted their rights to whaling regardless of international protocols.150 Ireland withdrew its membership from the major international convention regulating whaling, the International Convention to Regulate Whaling.151 Norway resumed whaling in 1993, sending six whaling ships to sea through protesting environmentalists.152 Russia and Japan indicated that they would consider re-introducing whaling practices in the future.153 Iceland called a meeting of pro-whaling states with the intention of forming an entirely new whaling regime.154 The possibility arose that widespread unregulated whaling might again be performed on the open seas, a practice that has not occurred since 1960.155 The result of U.S. coercive efforts in this case was a remobilized interest group dedicated to opposing U.S. coercive intervention. U.S. sanctions fed the sense of grievance that has led the minority to take drastic action.156 A Norwegian foreign ministers comment typified the sentiment of the whaling nations, [i]t would be intolerable if a small country were to be pressured into submission by big countries who only wish to pay environmental penance in currency of negligible value to them.157 Fifth, coercive trade sanctions can devastate the economies of developing countries who suffer under them. Developing countries may resent any sanctions or even the threat of sanctions by the United States as a new brand of economic colonialism. This resentment may result in nations refusing to participate in free economic trade. Further, the United
Shapiro, supra note 144, at 114 (citing US Anti-Cuba Law Seen Sapping Domestic Political Opposition, Agence France-Presse, Mar. 13, 1997, available in 1997 WL 2076602). 147 Digina B. French, Economic Sanctions Imposed by the United States Against Cuba: The Thirty-Nine Year Old Embargo Culminating with the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996, 7 U. MIAMI INTL & COMP. L. REV. 1, 13 (1999). 148 ABRAM CHAYES & ANTONIA HANDLER CHAYES, THE NEW SOVERIGNTY: COMPLIANCE WITH INTERNATIONAL REGULATORY AGREEMENTS 101-02 (1995). 149 Id. See generally Alma Soongi, Comment, The Makahs Decision to Reinstate Whaling: When Conservationists Clash with Native Americans Over an Ancient Hunting Tradition, 11 J. ENVTL L. & LITIG. 359, 384 (1996). 150 CHAYES & CHAYES, supra note 148, at 102. 151 Id. 152 Id.; Soongi, supra note 149, at 384. 153 CHAYES & CHAYES, supra note 148, at 102. 154 Id. 155 Id. 156 Id. 157 Id. (quoting J.J. Holst, foreign minister of Norway, Norwegian Information Service, Noriform Weekly Edition, no. 26 (Aug. 31, 1993)). See also Norway Stands Firm on Whaling Issue, Noriform Weekly Edition, at http://www.norwaves.com/norwaves/Volume1_1993/v1nw16.html.
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States as a leading economic power may serve as a role model for emerging nations. If the United States does not hesitate to use coercive pressure, this may send a signal to newly developing democracies that coercive economic power is not only acceptable but a preferred method of international trade policy. Finally, and perhaps most importantly, coercive tactics fail to address the underlying problems that make intellectual property so rampant in developing countries. Coercive sanctions do not address, and in fact they may exacerbate, the poverty and unemployment in developing countries that makes purchasing non-generic western patented drugs all but impossible for most citizens.158 Coercive sanctions can even implicate the deprivation and infringement of human rights.159 No matter how sanctions impact an economy, strong incentives still remain in place to purchase pirated goods. Significant ideological and cultural differences exist between developing and developed countries that underlie copying as an accepted social practice.160 Coercive sanctions are powerless to address these important issues. D. Responses to U.S. Coercion: The China and India Examples Coercive efforts to change a foreign nations behavior can provoke a variety of reactions ranging from immediate compliance to a military response. This section focuses on two of the four BRICs, China and India, and their respective responses to U.S. pressure to protect intellectual property rights. China and India react quite differently to threats of U.S. sanctions. What both responses have in common, however, is that they trap United States representatives into a frustrating cycle of inaction. These reactions reveal the likely reception that U.S. coercion will receive in the intellectual property arena and can provide a baseline for altering U.S. strategy to protecting intellectual property rights abroad. 1. The Retaliation Cycle: The Chinese Reaction to U.S. Coercion One of the most prominent examples of the limitations of coercive trade policies involves Chinas relationship with the United States. Chinas intellectual property relationship with the United States began in 1979, when both countries agreed that each nation shall treat the others patent and trademark protection the same. This arrangement arose out of a much larger landmark agreement between China and the U.S. which marked the beginning of post-Mao relations between the parties.161 China implemented its new trademark and patent laws within the context of socialist principles of public ownership, the effect being that few private individuals managed to obtain work-related patents in

See, e.g., Winston P. Nagan, International Intellectual Property, Access to Health Care, and Human Rights: South Africa v. United States, 14 FLA. J. INTL L. 155, 158-59 (2002). 159 Stalls, supra note 132, at 118. 160 E.g., Lin, supra note 77, at 209 (citing an author of China Business Review who states copying is not considered to be morally wrong in China because it has traditionally been a legitimate way to learn and share knowledge.). 161 Agreement on Trade Relations Between the United States of America and the Peoples Republic of China of 1979, July 7, 1979, P.R.C.-U.S., 31 U.S.T. 4652.

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their own names.162 Eventually, the United States lost patience and sought proactive responses to Chinese lack of enforcement. In 1988, Congress augmented the Trade Act of 1974 by giving expanded powers to the USTR and imposing strict deadlines on investigation and action against a wayward state.163 The USTR placed China on its Priority Watch List pursuant to these powers the following year.164 China enacted new intellectual property laws in response to the designation, but Congress remained unsatisfied. American businesses increasingly complained that their intellectual property rights remained unprotected and that piracy remained common. In 1991, China was upgraded to a Priority Foreign Country and the USTR launched an investigation into Chinas intellectual property protection practices.165 The United States threatened to impose tariffs on Chinese textiles, shoes, electronics, and pharmaceuticals worth $1.5 billion.166 Unlike earlier when China instituted reforms at the mere threat of special attention by the United States, this time the Chinese chose to retaliate. China responded with tariffs worth a similar amount on American aircraft, cotton, corn, steel, and chemicals.167 After six rounds of negotiations,168 Chinese and American representatives managed to reach compromise just hours before the sanctions would have been implemented.169 The parties signed a Memorandum of Understanding on January 17, 1992 (1992 MOU) and narrowly averted what could have been a costly trade war between two enormous economic powers.170 As a result of the 1992 MOU China significantly improved its intellectual property laws. Pursuant to the terms of the MOU, China joined the Berne Convention in 1992 and the Geneva Convention in 1993.171 Pursuant to these conventions, China amended its copyright law and issued improved implementing regulations.172 The new laws protected software programs for fifty years, removed formalities on copyright protection, and extended these protections to all works originating from a Berne Convention country.173 China also amended its 1984 Patent Law, implemented patent regulations, and agreed to the terms of the Patent Cooperation Treaty.174 In 1993, China upgraded its trademark law to include criminal penalties and adopted a new unfair competition law protecting trade

Yu, supra note 57, at 137. See supra text accompanying notes 61-69. 164 Yu, supra note 57, at 140-41. 165 Id. at 141-42. 166 Id. at 142. 167 Id. 168 Paul C.B. Liu, U.S. Industrys Influence on Intellectual Property Negotiations and Special 301 Actions, 13 UCLA PAC. BASIN L.J. 87, 112 (1994). 169 Yu, supra note 57, at 142. 170 Id.; Liu, supra note 168, at 112. 171 Warren Newberry, Note, Copyright Reform in China: A TRIPS Much Shorter and Less Strange than Imagined?, 35 CONN. L. REV. 1425, 1439 (2003) (citing Memorandum of Understanding Between the Government of the People's Republic of China (PRC) and the Government of the United States of America on the Protection of Intellectual Property, Jan. 17, 1992, P.R.C.-U.S., 34 I.L.M. 677 at art. 3(1) and 3(2)). 172 Yu, supra note 57, at 142-43. 173 Id. at 143. 174 Id. at 142.
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secrets.175 China established specialized intellectual property courts to hear cases and its Supreme Court issued a circular instructing lower courts to address intellectual property cases expeditiously.176 By any measure of the time, the 1992 MOU was as an enormous success for the United States. Within a three year period China improved its intellectual property protections on all fronts. It became clear by 1994, however, that China was not effectively enforcing the laws it had changed.177 American business complained again about the lack of intellectual property protection and lamented the significant losses they incurred due to piracy.178 China not only failed to increase enforcement of its laws, but allowed the growth of exportation of pirated products in great volume.179 The United States again placed China on its Priority Foreign Country list and again launched an investigation.180 On June 30, 1994, the USTR designated China as a priority foreign country pursuant to its Special 301 powers.181 The Clinton Administration threatened to impose tariffs against $1 billion worth of Chinese imports.182 China quickly retaliated by threatening tariffs against various American made products and by suspending negotiations with U.S. car companies seeking joint ventures.183 Again at the eleventh-hour, the U.S. and China struck a compromise and memorialized it in a 1995 agreement. The 1995 agreement established an enhanced copyright verification system, intensified border protection, and imposed training and education requirements for enforcement authorities.184 In exchange, the United States promised to end its section 301 investigation of China, to end its Priority Foreign Country designation, and to rescind the order imposing retaliatory tariffs.185 An accompanying action plan offered detailed instructions on executing the letters commands.186 Commentators praised the agreement, one lauding it as the single most comprehensive and detailed [intellectual property] enforcement agreement the United States had ever concluded.187 Within the first few months, Chinese government officials conducted massive raids against intellectual property infringers throughout China.188 Deputy U.S. Trade Representative Charlene Barshefsky called the implementation of the agreement, very promising and
Id. at 143; Newberry, supra note 171, at 1440. Lin, supra note 77, at 205. 177 Charles Tiefer, Sino 301: How Congress Can Effectively Review Relations with China After WTO Accession, 34 CORNELL INTL L.J. 55, 64 (2001). 178 Yu, supra note 57, at 143 (citing Patrick H. Hu, Mickey Mouse in China: Legal and Cultural Implications in Protecting U.S. Copyrights, 14 B.U. INTL L.J. 81, 93 (1996)). 179 Gregory S. Feder, Enforcement of Intellectual Property Rights in China: You Can Lead a Horse to Water, But You Cant Make it Drink, 37 VA. INTL L. REV. 223, 241-42 (1996). 180 Yu, supra note 57, at 144. 181 Lin, supra note 77, at 205. 182 Yu, supra note 57, at 144. 183 Id. 184 Peter K. Yu, The Copyright Divide, 25 CARDOZO L. REV. 331, 359-360 (2003). 185 Yu, supra note 57, at 146. 186 Id. at 146-47. 187 Id. at 148 (quoting Helen Cooper & Kathy Chen, China Averts Trade War with the U.S., Promising a Campaign Against Piracy, WALL ST. J., Feb. 27, 1995, at A3)). 188 Feder, supra note 179, at 245.
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expected that China would fully comply with the agreement.189 Barshefsky also prudently commented that, implementation is the key if China is to have credibility as a world class trading partner that keeps its commitments.190 By November, 1995, it became clear that the agreement was not producing the intended results.191 Representatives of software, motion picture, and record companies again argued that China had done little to curb the massive production and export of pirated products.192 For example, when Microsoft created a Chinese version of Windows 95 with a planned retail price of $45, the product was already available in open markets one week before its release.193 On April 30, 1996, China was again designated a Priority Foreign Country.194 Soon afterwards, the Clinton administration announced planned sanctions against $2 billion in trade goods.195 Within thirty minutes of the announcement, China responded with its own retaliatory sanctions on American products of equal value.196 An eleventh hour compromise on June 17, 1996, no surprise by now to analysts monitoring U.S.-China trade relations, occurred just before the deadline sanctions were to be imposed.197 The United States dropped China from its Special 301 list in exchange for Chinas promises of improved enforcement of intellectual property rights.198 There is little doubt that a cycle of behavior has developed between the United States and China regarding enforcement of intellectual property rights.199 The cycle begins with American executives complaining that intellectual property protection is insufficient and demanding that the U.S. government take action. The U.S. responds to these concerns by threatening a host of trade sanctions against China. This includes placing China on its priority list for special trade treatment. China responds with its own countersanctions of equal value. United States and Chinese interests aggressively negotiate a resolution often involving the closure of pirating factories or implementation of new measures. An agreement is reached, piracy declines significantly and the United States declares success. As little as months later, piracy increases again, U.S. business representatives complain, and the government responds with further action against China. The cycle is summarized below in the following flowchart: The China Cycle

Id. at 245 n.138. Implementation of U.S.-China Accord "Very Promising," USTR Official Says, 12 INT'L TRADE REP. (BNA) 938 (1995). 191 Yu, supra note 57, at 148. 192 Anne Phelan, China Urged to Meet IPR Obligations, 17 E. ASIAN EXEC. REP. 5, 5 (1995). 193 Lin, supra note 77, at 205-06. 194 Yu, supra note 57, at 148. 195 Id. at 148-49. 196 Id. at 149. 197 Id. See also Lin, supra note 77, at 206. 198 Lin, supra note 77, at 206. 199 This cycle has been adapted from Yu, supra note 57, at 134-35.
190

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1. American executives complain about IP infringement and demand U.S. government coercive sanctions

5. Piracy levels temporarily decline, then rise again as both U.S. and target government attention focuses elsewhere

2. United States government threatens trade sanctions

4. U.S. and target nation reach compromise, often at the last minute

3. Target country retaliates with countersanctions

This cycle, frustrating though it may appear, has actually produced some favorable results for United States interests. China has improved its legal framework and has shut down illegal production of pirated music.200 Indeed, China is now an importer, not an exporter, of pirated products.201 Chinese piracy, however, still remains rampant and dominates sales of intellectual property sensitive goods.202 There is little doubt that if the United States again decided to get tough with China, that China would react in a similar fashion. No less important, the results would be equally uninspiring over the long term. 2. The Delay Cycle: The Indian Reaction to U.S. Coercion India responds quite differently than China to U.S. pressure. Instead of striking back at American interests like China does, India simply progresses toward compliance at the slowest pace possible that avoids sanctions. For example, during the GATT Uruguay Round, India was a leading opponent of making intellectual property a trade issue and developing the TRIPS regime.203 As TRIPS regime became fully effective towards India on January 1, 1995, India pursued the goals of meeting the TRIPS requirements at a glacial pace.204 On December 31, 1994, the President of India promulgated an amended
Yu, supra note 57, at 153. Id. 202 See supra text accompanying notes 122-126. 203 Elaine B. Gin, International Copyright Law: Beyond the WIPO and TRIPS Debate, 86 J. PAT. & TRADEMARK OFF. SOC'Y 763, 781 (2004) (Particularly the Group of Ten (G-10) developing countries (Argentina, Brazil, Cuba, Egypt, India, Nicaragua, Nigeria, Peru, Tanzania, and Yugoslavia) vehemently opposed placing IP on the agenda of the Uruguay Rounds.). 204 Even after 1995 Indian representatives still resisted the implementation of TRIPS. In November, 1996, Indian lawmakers organized a conference to discuss intellectual property rights enforcement under TRIPS. N. Vasuki Rao, Anti-piracy Conference Turns, Instead, Anti-U.S., J. COMMERCE, Nov. 15, 1996, at 5A. The conference, organized by Indian anti-TRIPS lawmakers, quickly devolved into a bashing of the United States and an organizing of efforts to resist U.S. action on intellectual property. Id. When one Indian
201 200

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patents ordinance that amended Indias Patents Act of 1970.205 The amendment stated that India would accept submissions for pharmaceutical and agricultural product inventions.206 This amendment was required by Article 70.8(a) of TRIPS.207 The ordinance became effective on January 1, 1995.208 Indian ordinances have the force of law provided that both houses approve of the ordinance within six weeks after the beginning of a new house of parliament.209 The Indian parliament debated the measure but it lapsed on March 26, 1995 because no action was taken.210 The lower house of Parliament managed to pass a bill that would give effect to the Presidents patentstrengthening amendment.211 The upper house of Parliament then took the bill, referred it to a committee, which failed to act on it before the dissolution of the lower Parliament that year, causing the bill to lapse altogether.212 This procedural mishandling of the TRIPS enabling legislation was particularly problematic because India was already receiving numerous pharmaceutical and agricultural product patent applications from foreign interests.213 The United States grew impatient with Indian delays. The USTR placed India on its list of priority watch countries, opened an investigation into Indias failure to protect pharmaceutical and agricultural chemical product patents as required by TRIPS, and sought consultation with the WTO.214 The United States requested that the dispute settlement body determine whether India has failed to satisfy its obligations under TRIPS.215 The WTO Dispute Settlement Body concluded in September, 1997, that India was indeed in a state of non-compliance, forcing India to amend its patent legislation or face trade sanctions.216 India appealed, and the Appellate Body upheld the Boards findings and conclusions.217 The decision was formally adopted by the WTO Dispute

representative suggested that countries refuse to implement the TRIPS agreement until the United States repeals the Omnibus Trade and Competitiveness Act of 1998, it received significant support. Id. 205 Srividhya Ragavan, Cant We All Get Along? The Case for a Workable Patent Model, 35 ARIZ. ST. L.J. 117, 143 (2003). The President was able to promulgate these changes because Article 123 of the Indian Constitution enables the President to legislate when one or both houses in parliament are not in session and the President is satisfied that circumstances exist which render it necessary for him to take immediate action. See Report of the Panel, India-Patent Protection for Pharmaceutical and Agricultural Chemical Products, Sep. 5, 1997, WT/DS50/R (1997) [hereinafter Panel Report]. The previous year the Indian parliament had debated making the amendments that TRIPS required but adjourned without reaching the conclusion. David K. Tomar, Note, A Look Into the WTO Pharmaceutical Patent Dispute between the United States and India, 17 WIS. INTL L.J. 579, 585 (1999). This is probably what led the Indian President to act according to his emergency powers. Id. 206 Tomar, supra note 205, at 585. 207 Panel Report, supra note 205, at para. 2.3. 208 Id. 209 Ragavan, supra note 205, at 143 n.242. 210 Id.; Tomar, supra note 205, at 585. 211 Ragavan, supra note 205, at 143. 212 Id. at 143-44. 213 Tomar, supra note 205, at 586. 214 Id. 215 Ragavan, supra note 205, at 144. 216 Id. at 145. See also Panel Report, supra note 205, at para. 8.1 217 See Report of the Appellate Body, India-Patent Protection for Pharmaceutical and Agricultural Chemical Products, Dec. 19, 1997, WT/DS50/AB/R (1997).

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Settlement Body in January 1998 with a March 2, 1998 deadline for India to amend its patent regime.218 Americans frustration with Indias glacial pace did not end here. A March 1998 deadline for negotiating a compliance timetable passed without incident.219 The United States agreed to extend this deadline three times in order to work out a compromise on how to implement Indian patent legislation.220 In April 1998 the two parties informed the dispute settlement body that they had finally agreed upon a timetable for compliance giving India until April 19, 1999 to implement legislation.221 In December of 1998, Indias upper house of parliament passed TRIPS-compliant legislation, but the lower house failed to do so.222 A temporary emergency measure was passed in March 1999 to attempt to comply with TRIPS.223 Meanwhile, the backlog of unprocessed patent applications was numbered at 30,000 and growing.224 On February 21, 2000, United States pharmaceutical representatives requested that the USTR place India on the Priority Foreign Country list because of Indias refusal to adopt adequate and effective protection for pharmaceutical products and . . . their denial of equitable market access to US firms.225 India, again under pressure from the United States, introduced the Patents Amendment Bill 1999 in the upper house on December 20, 1999 to have Indian patent law comply with TRIPS.226 The bill amended patent protection to twenty years, but reiterated that computer programs and biological processes were not patentable.227 The bill was not passed and it was referred to committee for further review.228 Little occurred until 2002, when a revised bill was drafted to incorporate developing-country favorable safeguards allowing nations to initiate compulsory licensing of patented drugs in a national emergency.229 This revised bill, however, did not incorporate the products patent regime that Article 27 of TRIPS required.230

Ragavan, supra note 205, at 145. Tomar, supra note 205, at 589. 220 Id. 221 Id. 222 Ronald J.T. Corbett, Protecting and Enforcing Intellectual Property Rights in Developing Countries, 35 INTL LAW. 1083, 1097 (2001). 223 Id. 224 Id. According to a statement authored by Pharmaceutical Research and Manufacturers Association of America (PhRMA), at the rate that India was processing patents at the time, these Patents would not be examined for at least ten years. Id. 225 Press Release, PhRMA, PhRMA Calls for Vigillance [sic] on Intellectual Property Protection; Recommends Argentina, Egypt and India as Priority Foreign Countries, at http://www.pharma.org/mediaroom/press/releases///21.02.2000.20.cfm (Feb. 21, 2000). 226 Ragavan, supra note 205, at 146. 227 Id. 228 Id. at 148. 229 Id. at 148 & n.312. 230 Id. at 148. Article 27 of TRIPS requires signatories to offer patent protection for any invention without discrimination as to the field of technology. Bryan Mecurio, The Impact of the Australia-United States Free Trade Agreement on the Provision of Health Services in Australia, 26 WHITTIER L. REV. 1051, 1094 (2005); Harris, supra note 48, at 106. For example, developing countries cannot treat patents protecting
219

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The Indian parliament tried again by introducing a Patents Third Amendment Bill,231 with the goal of enacting this Bill before January 1, 2005, the deadline for India to introduce a product patent regime under TRIPS.232 On March 23, 2005, India finally passed the bill with a product patent regime in place.233 The bill establishes a product patents regime for pharmaceutical, agricultural, and software products.234 Yet even this latest measure is still plagued with problems. PhRMA, an organization that represents some of Americas largest pharmaceutical research companies,235 has expressed concern that late amendments to the bill would bring India into conflict with its minimum international obligations.236 In addition, the bill failed to resolve critical issues of data exclusivity for product patents and compulsory licensing of pharmaceuticals.237 Indian political groups actively fought for the acts reversal. Members of the Communist Part of India passed a resolution asking the government to carefully re-examine the bill because it could cause prices of life saving drugs to rise.238 Aid agencies lobbied Indian representatives, stating that this measure fails to take into account the voice of the poor in the developing world who rely upon Indian pharmaceuticals for health care.239 Indias sluggish efforts to improve intellectual property rights have successfully allowed India to stave off full implementation of TRIPS and its stringent intellectual property standards. Although it is much less obvious than Chinas, an Indian cycle of behavior appears to occur when the U.S. applies pressure. Indias bureaucracy moves at a glacial pace and only in the face of imminent action from the United States. When India finally does respond, it usually completes the bare minimum necessary to avoid economic sanctions. No doubt from Indias perspective these actions merely serve to protect Indian sovereignty in the face of an aggressive foreign power. The result is a frustratingly slow effort, at least from the perspective of the United States, to protect U.S. intellectual property in India. The India Cycle

food, agriculture, medicines, and software differently than other patentable inventions. Harris, supra, at 106. This includes whether the patents are for products or processes. Id. 231 Patent Legislation Passed March 2005, http://www.cptech.org/ip/health/c/india/patents-actamendments.html (providing detailed information). 232 Ragavan, supra note 205, at 148. 233 Press Release, PhRMA Welcomes Passage of Patent Bill in India, http://www.phrma.org/mediaroom/press/releases/23.03.2005.1157.cfm (Mar. 23, 2005). 234 Patents Bill: Govt takes Left on board, BUSINESS STANDARD, at 1. (Mar. 19, 2005), available at 2005 WLNR 4249411 235 For more information see http://www.phrma.org/whoweare. 236 Id. 237 Patently Unclear: A Crucial New Intellectual Property Regime Disappoints, THE ECONOMIST, Jan. 22, 2005, 63. 238 Aarthi Ramachandran Chandigarh, Review Law, says CPI, BUSINESS STANDARD, at 7 (Apr. 1, 2005), available at 2005 WLNR 5037345. 239 Pharma Welcomes Indian Patent Law Changes, but NGOs Fear for Generics, PHARMA MARKETLETTER (Apr. 4, 2005) available at 2005 WLNR 5335544.

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1. American executives complain about IP infringement and demand U.S. government coercive sanctions

5. Target country improves regime the minimum amount necessary to stave off U.S. punitive measures

2. United States government threatens trade sanctions

4. United States demands increased results; moves to impose sanctions

3. Target country moves as slow as possible toward complying with U.S. demands

Why does India react so differently than China to U.S. coercion? The answer lies at least in part with the unique nature of Indias economy and history. Twenty-five years ago, Indian and Chinese citizens possessed similar per capita incomes.240 Today, Chinese incomes are nearly double that of their Indian counterparts.241 India has fallen behind China for the claim of leading Asian economic power. While China has embraced globalization and trade with some enthusiasm, Indian economic reforms have been slower to take hold. A 1999 study compared Chinese and Indian practices towards trade in various areas such as agriculture, information technology, and services.242 The study found China possessing equal or superior open market regulations to India in all eight categories.243 Whereas Chinese infrastructure improvements backed by foreign agreements move speedily along once government approval has been given, numerous lawsuits and political debate have significantly slowed equivalent improvements in India.244 India may lose foreign direct investment as a result.245 India lacks a Chinese equivalent of a
A.V. Rajwade, India and China: A Comparison, http://www.rediff.com/money/2005/jan/18guest.htm (Jan. 18, 2005). See generally Subramanian Swamy, The Economic Distance Between India and China, 1955-73, 70 CHINA Q. 371 (1977). 241 Id. 242 Daniel H. Rosen, China and the World Trade Organization: An Economic Balance Sheet, Institute for International Economics Policy Brief 99-6, available at http://www.iie.com /publications/pb/pb.cfm?ResearchID=93. 243 Id. 244 Danielle Mazzini, Stable International Contracts in Emerging Markets: An Endangered Species?, 15 B.U. INTL L.J. 343, 359 (1997). See also Jayanthi Iyengar, India v. China: Its all in the Mind, ASIA TIMES (Nov. 19, 2002), at http://www.atimes.com/atimes/Asian_Economy/DK19Dk01.html. 245 Mazzini, supra note 244, at 359 (Many investors compare China and India when determining where to invest . . . . [and] China may have the edge.); Jayanthi, supra note 244, at 2 (As of today, China is undoubtedly an attractive investment destination, with consumer demand growing at rates far exceeding expectations. This is unlike India, which has proved expert estimates wrong[.]).
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Hong Kong that can efficiently finance commercial activity within the rest of India.246 At least for the moment, Indias economic muscle simply does not compare to its Chinese competitor. As a result, India lacks the bargaining power that China possesses to negotiate from a position of strength with the United States.247 Indias response is no folly, however. This delay cycle has been working successfully for India for at least fifteen years. India even today has still not fully complied with TRIPS and U.S. governmental and private interests must keep close watch to ensure that India progresses in this area. This tactic is not only available to India, but perhaps any developing country with insufficient strength to respond directly with countersanctions. This would certainly include Brazil, Russia, and other less powerful developing countries. The lesson from the India cycle is not that U.S. coercion is not strong enough. Rather, what should be gleaned from these events is that coercion alone cannot produce a successful long-term result of protecting intellectual property rights abroad. II. International Bargaining and the Use of Unilateral Initiatives in the BRIC Economies to Protect Intellectual Property Rights Abroad As shown in the previous Part, a common response to a nations undesirable behavior is to impose sanctions until the target nation ends that behavior. Sanctions only have limited success in the context of intellectual property rights. Thus, the need presents itself for an improved strategy. This section will discuss the use of unilateral initiatives as one strategy to establish long-term change in intellectual property protection in the BRICs. This Part defines unilateral initiatives and explains the difference between a unilateral initiative strategy and a reciprocal strategy of bargaining. This Part then offers real world examples of private enterprises using unilateral initiatives to successfully navigate difficult foreign markets while still maintaining their intellectual property integrity. This Part concludes that unilateral initiatives can play a significant role in protecting intellectual property rights in the BRIC economies. A. The Unilateral Initiative as a Bargaining Tool A unilateral initiative is defined as a voluntary, conciliatory action presented by one party to the benefit of the other.248 A unilateral initiative is neither conditioned upon past compliant conduct or immediate expectation of future compliant conduct.249 Unilateral
Jesse Parker, The Lotus Files: The Emergence of Technology Entrepreneurship in China and India, 26 FLETCHER F. WORLD AFF. 119, 132 (2002). 247 E.g., Jayanthi, supra note 244, at 1 ([China] already figures on the list of the US for exclusive trading partners, rubbing shoulders with Canada, Mexico and Japan. The admission threshold for this exclusive club is US$120 billion in two-way trade.). Indias trade with the United States nowhere reaches this amount. Rosen, supra note 242, at 5. 248 E.g., Michael D. Large, The Effectiveness of Gifts as Unilateral Initiatives in Bargaining, 42 SOCIOLOGICAL PERSPECTIVES 525, 526 (1999) (defining a unilateral initiative as a series of non-contingent conciliatory gestures from one party to another.). 249 Id.
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initiatives are not merely gifts, but constitute any action that is taken without immediate expectation of response from the receiving party. Unilateral initiatives are usually considered positive, but do not necessarily have to present positive benefits to the receiving party. Unilateral initiatives may also be used positively to benefit the receiving party and negatively to impose punishment, sanctions, or economic harm. This paper will concentrate on unilateral initiatives that promote positive change for both the initiator and the recipient. The modern theory of unilateral initiatives arguably originates from Charles Osgood in his 1962 book titled, The Alternative to War or Surrender.250 Osgood sought to describe an effective method for reducing the then unusually high tensions between the Soviet Union and the United States.251 He devised a theory called GRIT, Graduated and Reciprocated Initiatives in Tension Reduction. The GRIT theory held that if graduated and reciprocal negative action can increase tension between the parties, so graduated and reciprocal positive action can reduce tension and rebuild the trust necessary for conciliatory action.252 Unilateral initiatives differ from a more commonly practiced reciprocal strategy and this distinction is worth noting. Reciprocity in the context of bargaining involves a matching strategy in prisoners dilemma style games whereby a bargaining party chooses the same action as its opponent did in the immediately preceding trial.253 A cyclical, tit for tat strategy of reciprocal matching enables parties to cooperate for mutual gain without risking exploitation by the opposing party.254 The goal is to establish a pattern of reciprocation based upon prior conduct. Pure reciprocity,255 however, is not without risks. Pure reciprocation depends upon the mutual participation of both parties, but nothing more. Parties can simply conduct implicitly or explicitly agreed upon positive exchanges at specified times. What holds the parties together in such exchange conditions is merely the expectation that the act by one party will result in a response by another. As a result, reciprocation strategies without more are vulnerable to collapse. The motives and intentions of both parties may be ambiguous. An act considered by the initiator to be a sufficiently reciprocal act might be interpreted by the receiver of that act as insufficiently reciprocal or a negative response. Parties might also exploit reciprocal
See CHARLES OSGOOD, THE ALTERNATIVE TO WAR OR SURRENDER (1962). Id. 252 Id. at 85-98. See also Svenn Lindskold & Michael J. Collins, Inducing Cooperation by Groups and Individuals, J. CONFLICT RES. 679, 689 (1978). 253 Elizabeth Heger Boyle & Edward J. Lawler, Resolving Conflict through Explicit Bargaining, 69 SOCIAL FORCES 1183, 1185 (1991). 254 See generally Nehemia Friedland, Attribution of Control as a Determinant of Cooperation in Exchange Interactions, 20 J. APPLIED SOCIAL PSYCHOLOGY 303 (1990). 255 I define a purely reciprocal relationship as one that is based solely upon the mutual exchange of agreed upon benefit over time that is dependent upon issuance of payment and response. No contract exists between the parties. Rather, it is a relationship that continues solely because of the persistence of the repeated exchange.
251 250

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patterns because of a short term financial need to maximize ones own self-interest or submission to political pressure from competing interests. Exploitative behavior might simply originate because the parties simply must experience and then learn the futility of mutual defection from the reciprocation norm.256 When one party defects, even temporarily, from reciprocation or another party views a partys behavior as insufficiently reciprocal, rapid escalating negative action is likely. A nation that perceives itself insufficiently recompensed for its prior generosity could simply respond with a negative sanction to punish the supposed wrongdoer. That would promote an immediate sanction in response to the Act. A positive reciprocation norm could easily devolve into a negative one. Nations responding in kind to assist one another could now trap themselves in a devolving cycle of retribution. Making matters worse is that punishing a foreign nation is easier to accomplish politically that rewarding a friendly one. Local interests injured by the previous cooperative behavior (i.e. subsidized local producers injured by free trade agreements) may seize on the perceived insufficiently reciprocal act as justification for a broader change of political policy. Further, sanctions are easier to implement. A simple law imposing tariffs on imports is easier to draft and implement than any foreign assistance program. Finally, a national response to insufficient reciprocation might even trigger vengeful acts. Whereas retribution implies a proportional response to a misdeed, 257 revenge seeks to compensate not only for the harm but for the anger and loss of face that might accompany a perceived slight. 258 The result may be a negative reciprocity behavior that is exponentially more harmful than the cooperative behavior the positive reciprocity was seeking to accomplish. The ultimate result is an entrenched pattern or mutual resistance and hostility that scholars call a lock-in.259 When a lock-in occurs, restarting a mutually beneficial reciprocal relationship becomes nearly impossible. What reciprocal bargaining relationships lack is an essential component to a successful relationship trust. Trust at its most basic is the expectation that another person will cooperate in a situation with multiple options.260 Trust is also a state of mind regarding expectations about anothers motives.261 This includes the examination of prior behaviors or interactions that give a party the basis for anticipating future conduct.262 Most importantly for the purposes of this article, trust requires risk. Inherent in actions based upon trust is the increase in vulnerability to opportunistic behavior from the party
S.S. Komorita, J.A. Hilty, et. al, Reciprocity and Cooperation in Social Dilemmas, 35 J. CONFLICT RESOLUTION 494, 496 (1991). 257 Id. at 787. 258 Id. 259 Boyle & Lawler, supra note 253, at 1185. 260 Edward J. Lawler, Rebecca Ford & Michael D. Large, Unilateral Initiatives as a Conflict Resolution Strategy, 62 SOCIAL PSYCH. Q. 240, 242 (1999). 261 Frank L. Jefferies & Richard Reed, Trust and Adaptation in Relational Contracting, 25 ACAD. MGMT. REV. 873, 873 (2000). 262 Lawler & Ford, supra note 260, at 242.
256

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in whom trust is placed.263 Any nation curbing its discretion to conform to a mutually agreed upon regime necessarily takes the risk that the other nation will receive the benefits of the conciliatory act without responding in kind. Unilateral initiatives, unlike reciprocation relationships, are more likely to provide a foundation of trust and thus effectuate negotiations in a variety of ways. First, unilateral initiatives can break a lock-in problem between two deeply entrenched parties. For example, in 1977 President Anwar Sadat of Egypt, a long-time adversary to Israel, stunned the world by unilaterally visiting Jerusalem, meeting with Israeli leaders in Israel, and speaking to the Knesset on promoting peace between the two nations.264 Sadat did this without prior consultation with the Egyptian government and Arab leaders, and did so in the face of enormous opposition from the Arab world.265 Most importantly, Sadat acted without requiring an equal conciliatory gesture from Israel or the United States, declaring no more war to the Israeli Knesset without a contingent on Israeli concessions.266 This enormous gamble to Sadats personal safety and political future resulted in a highly effective bargaining tool. As a result of Sadats visit, America increased its involvement in the negotiation process, which Sadat believed was essential for receiving Israeli concessions in future discussions. Furthermore, Israeli government leaders approved of the visit and in turn pressured Israeli leadership to make significant concessions.267 Sadat and Israels Menachem Begin signed the historic Camp David Accords the following year.268 Second, unilateral initiatives can deescalate crisis situations. In at least four twentiethcentury global crises where nations appeared to be on the brink of war, unilateral initiatives proposed by a third party helped adversaries deescalate from an increasingly aggressive strategy of coercive foreign policy.269 Unilateral initiatives, when posed in this fashion, can allow one party or the other to save face by accepting the initiative while still maintaining the appearance of strength to domestic supporters and foreign allies.270 The author of this study concluded that [t]he most interesting findings were associated with the prevalence and effectiveness of reciprocating influence strategies.271

Jefferies & Reed, supra note 261, at 873. This event is described in Zeev Maoz & Dan S. Felsenthal, Self-Binding Commitments, the Inducement of Trust, Social Choice, and the Theory of International Cooperation, 31 INTL STUD. Q. 177, 189-93 (1987). 265 Id. at 190. 266 Id. at 191. 267 Id. at 191. 268 See generally Randolph Michael Nichol II, Negotiating on Un-Holy Land the Road from Israel to Palestine, 4 PEPP. DISP. RESOL. L.J. 87, 105 (2003). This unilateral initiative may have cost Sadat his life. Sadat was assassinated in 1981 by Islamic extremists. Sadats peace initiative may have been a motivating factor. See, e.g., David S. Sorenson, The Dynamics of Political Dissent in Egypt, 27 FLETCHER FORUM WORLD AFF. 207, 218 (2003). 269 Russell J. Leng & Hugh C. Wheeler, Influence Strategies, Success, and War, 23 J. CONFLICT RES. 655, 679 (1979). 270 Id. 271 Id. at 681.
264

263

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Third, unilateral initiatives may also be used to enhance other negotiating strategies. For example, one author examined the relationship between American actions and Soviet reactions in three major global crises during the Cold War: the 1948-49 blockade of West Berlin, the 1961 Berlin crisis, and the 1962 Cuban missile crisis.272 The author found that when the United States combined threats with positive inducements, it received more Soviet cooperation than when it had used threats alone.273 B. Examples of Successful Unilateral Initiatives Unilateral initiatives can positively impact how a U.S. multinational corporation is treated in a developing nation. For example, Donaldson and Weiner report the experience of a major telecommunications company in a developing market.274 The company performed in the market so successfully that they rapidly outsold competitors and reported top earnings.275 Soon after the company's initial success, copycats appeared producing cheap imitations of some of their most popular products.276 Furthermore, government regulators demanded an endless array of levy fees, taxes, and other payments that likely no Chinese firm would ever be asked to pay.277 No doubt this is a familiar story to firms investing in any developing economy. A firm makes an initial successful investment in a developing country. A short-sighted government excessively imposes discriminatory taxation on what it perceives as a rich multinational corporation with deep pockets.278 Copycats immediately seek to exploit the new product demand by flooding the market with inferior products. The initial returns on investment for the company reach their maximum and then decline. Naturally, the U.S. MNC must consider its response. One option is that the firm can certainly withdraw completely from the market. The cost of withdrawal is obviously significant. The firm will lose any possible future market share in the economy. Indirectly, the firms withdrawal will aid competitors who will take advantage of the vacuum in demand. Alternatively, the firm could merely threaten to withdraw and by doing so use its economic leverage to extract a response from government regulators to stop piracy. Such threats in many cases, however, are not possible. Significant investments by the firm in the home country, such as a factory, a mine, a plantation, or even infrastructure create a hostage effect making promises to withdraw from the host

Russell J. Leng, Reagan and the Russians: Crisis Bargaining Beliefs and the Historical Record, 78 AM. POL. SCI. REV. 338 (1984). 273 Id. at 353. 274 John Donaldson and Rebecca Weiner, Swashbuckling the Pirates: A Communications-Based Approach to IPR Protection in China, in CHINESE INTELLECTUAL PROPERTY LAW AND PRACTICE 409 (1999). The name of the firm was deliberately withheld by the authors at the companys request. Id. at 437 n.4. 275 Id. at 415. 276 Id. 277 Id. 278 See generally Yoram Margalioth, Tax Competition, Foreign Direct Investments and Growth: Using the Tax System to Promote Developing Countries, 23 VA. TAX REV. 161 (2003) (describing the impact of host country taxation on foreign direct investment).

272

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country not credible.279 The host country knows that the firms withdrawal would cost that firm too much in lost resources and can thereby discount the threat of departure. Alternatively, the MNC can lobby the U.S. government to implement to impose sanctions. This is the all too familiar response of most U.S. industries facing the lack of sufficient intellectual property protection in a developing nation. The questionable efficacy of such measures has already been discussed above in the section on coercion.280 A third alternative, which the firm selected, is to conduct strategically planned unilateral initiatives. Even in the face of excessive regulation and mounting piracy, the firm aggressively publicized its long-term commitment to the nations market.281 Without any expectation of reciprocity, the firm committed itself to reinvest all profits back into its national operations.282 The firm donated funds to charities popular with government officials.283 The firm implemented elaborate business and technical training programs that localized their management and developed a pool of local component suppliers for their products.284 The company permitted technology transfer.285 One may think that local observers would view this as a nave effort that would provide yet another opportunity for a host nation to take advantage of an unwelcome foreigner. Yet, when this telecommunications firm executed these unilateral initiatives, the opposite occurred. The stream of demands for unnecessary fees and taxes declined.286 Senior government officials began to trust the company as one committed to the benefit of its citizens interests as well as its own.287 Most importantly, piracy of the telecommunication firms intellectual property significantly decreased. State and local branches responsible for intellectual property investigations of infringement charges offered strong and ongoing support to the U.S. enterprise. State agencies were extremely helpful in finding and closing unlicensed manufacturers.288 A spokesperson for the company reported that there was no reluctance to assist the firm and that there was a clear sense that the government wants to help this company thrive, because its interests are seen as parallel to that of [the nations].289 This example occurred in China but could have happened in any of the four BRICs. The company skillfully used a variety of unilateral initiatives to induce positive change. The
Peter J. Carney, International Forum Non Conveniens: Section 1404.5 A Proposal in the Interest of Sovereignty, Comity, and International Justice, 45 AM. U. L. REV. 415, 458 (1995) (citing MULTINATIONAL CORPORATIONS, THE POLITICAL ECONOMY OF FOREIGN DIRECT INVESTMENT 6 (Theodore H. Moran ed., 1985) (describing hostage effect)). 280 See supra Part I.C. 281 Donaldson & Weiner, supra note 274, at 415. 282 Id. 283 Id. 284 Id. 285 Id. 286 Id. 287 Id. 288 Id. at 416. 289 Id.
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firm publicly announced a long-term commitment to the Chinese market even when it appeared unprofitable in the short term to do so. The firm wisely donated charitable gifts and offered elaborate training regimes to Chinese citizens. The company made sure to publicize these initiatives, make commitments, and adhere to those commitments over time to the benefit of the Chinese economy. The firm also executed initiatives with an eye toward having the maximum effect. The firms deliberate choice to donate to charities favorable to government officials is just one example of the kind of interestssavvy approach that can maximize the effect of these practices. As a result of these unilateral initiatives, the firm became one of a few that Chinese leaders cited when discusses foreign MNCs whose activities are beneficial for China.290 Such a favorable marketplace does not eliminate piracy. Unilateral initiatives, however, created an environment where Chinese local and national representatives were allies, not opponents, when any threat of piracy appeared. Not only will current piracy decline but future piracy will also be suppressed as Chinese officials take a more protective stance towards protecting the U.S. firms property rights. As the article concludes, Chinese courts, media and regulatory and enforcement authorities have shown their willingness to carry water in IPR battles for companies they perceive as Chinas friends.291 Another firm used unilateral initiatives to reduce piracy by capitalizing on cultural norms. In China, the Heinz Corporation had been facing significant competition from pirates across product lines. 292 In the case of its Wrigley Gum, for example, pirates copied Heinzs products, delivery trucks, and even uniforms of delivery personnel in order to sell their products.293 When Heinz discovered that local Chinese manufacturers produced unauthorized imitations of their infant formula,294 Heinz representatives embarked on an unusual approach. Instead of withdrawing from the market or lobbying the USTR for action, Heinz brought reporters on a travel-expense paid visit to observe raids against the pirating manufacturers.295 The publicity brought negative exposure to the pirates and positive exposure for officials who aided in the raids.296 When discussing the raids, Heinz did not emphasize the importance of strong intellectual property protection as a just measure for corporate inventors.297 Rather, Heinz representatives focused on the low quality and the unsanitary conditions at the pirated factories.298 Heinz highlighted the risk that such unsafe conditions created for children and how the raid on the factory was a consumer protection measure designed to safeguard products consumed by the Chinese people.299 Although the raid had obvious benefits for Heinz, the outward motivation for the raid was the establishment of consumer safety and not the reduction in intellectual property piracy.
Id. at 415. Id. at 416-17. 292 Neil Shister, China Never Stops, 18 WORLD TRADE 16, 21 (2005) 293 Id. 294 Donaldson & Weiner, supra note 274, at 426. 295 Id. 296 Id. 297 Id. 298 Id. 299 Id.
291 290

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The Heinz approach was successful not just because it showed a concern for others without immediate expectation of return, but it capitalized on a strong Chinese concept of using public shame to establish social norms.300 This practice is widely used. For example, Li Quizhong, a Chinese debt collector, functions in a legal environment that has no small claims courts, a slow judicial system, and corrupt officials.301 Yet, Quizhong collects debts successfully because he confronts people in their homes and businesses wearing a red vest emblazoned with the words, Debt Collector.302 For even greater effect he bangs a two-foot wide gong and declares for all to hear, pay your debts!303 Quizhong declares his strategy highly effective and receives requests for assistance from as far away as Tibet.304 Heinz representatives eschewed the gong and sash, but their efforts were no less effective. Representatives report that after the raids, the company encountered no serious problems with infant formula piracy.305 Unilateral initiatives can also take the form of educational efforts aimed at changing perceptions of Chinese citizens. According to Lin, the Chinese government has made significant efforts toward impressing upon its people the importance of intellectual property rights.306 For example, representatives of Guangdong province regional government have sponsored a prize-winning newspaper quiz, and a television contest on intellectual property rights protection.307 There have also been mass celebrations on copyright protection for audiovisual products, support by celebrities, public lectures on intellectual property rights and economic development, and regular columns about intellectual property in the popular press.308 This broad educational initiative offers two important lessons for U.S. multinationals that can implement these very same programs. First, government officials under the right conditions will exert significant influence over its people in order to protect intellectual property rights. No doubt U.S. firms must encourage or even initiate such practices when sufficient trust exists between government regulators and the firm. Such efforts must also be placed within the context of its benefit for ordinary Chinese citizens. This may involve seeking support of local Chinese intellectual property holders in any educational campaign.309 Advertising protection of
Cf. Carole J. Buckner, Realizing Grutter v. Bollingers Compelling Educational Benefits of Diversity Transforming Aspirational Rhetoric into Experience, 72 UMKC L. REV. 877, 916 (2004) (Chinese culture de-emphasizes the individual and emphasizes deference to others to avoid bringing shame on the extended family.); Sarah M. Teal, Domestic Violence: The Quest for Zero Tolerance in the United States and China: A Comparative Analysis of the Legal and Medical Aspects of Domestic Violence in the United States and China, 5 J. L. SOCIETY 313, 348 (2003) (stating in the context of domestic violence that, Chinese culture demands that family shame should not be aired in public.) (quotations omitted). 301 Karby Leggett, Chinese Deadbeats Cringe at the Sound of Mr. Lis Gong He Appears at their Doors, Shouting Pay Your Debts, Shame is Better than Law, WALL ST. J., Sep. 21, 2000, at A1. 302 Id. 303 Id. 304 Id. 305 Donaldson & Weiner, supra note 274, at 426. 306 Lin, supra note 77, at 208. 307 Id. 308 Id. at 208-09. 309 Yu, supra note 57, at 208-09 (American businesses should rally the support of local intellectual property holders and help them develop a lobby that aims to protect their own interests.).
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intellectual property rights because it is helps to line the pockets of a foreign multinational will probably result in a negligible response. Second, this example illustrates the power of non-central government agencies to impact intellectual property rights. Apparently the regional government, not the national administration, was responsible for these initiatives. As the examples highlight, unilateral initiatives can be an effective method for generating government and citizen support for the protection of intellectual property rights. There is no single formula that works every time. The scope of unilateral initiatives is as broad as the firms who wish to use them. The next and last section examines the planning steps necessary to implement a unilateral initiative in a developing economy to maximum effect. C. Unilateral Initiatives: Planning Requirements Unilateral initiatives are no panacea for piracy. The mere presence of an initiative without more cannot guarantee increased intellectual property protection. Unilateral initiatives must be implemented in a tactical fashion no different than any other bargaining approach or marketing plan. This section discusses practices that may optimize the implementation of a unilateral initiative in a BRIC or other developing economy. First, unilateral initiatives by a multinational corporation should be announced publicly. The U.S. firm should not hesitate to invite domestic press, foreign journalists, and even government officials to the unveiling of the plan and use whatever marketing channels are necessary to publicize the initiatives announcement. The explicit goal of the initiative must be clear a sincere long-term interest in serving the nations marketplace to the benefit of its consumers.310 Announcing that the purpose of the educational or other training initiative is to protect ones own intellectual property rights defeats the purpose of the initiative and recasts the event as a mere self-service to a foreign enterprise. A public announcement, rather than a private implementation, enhances the value of the initiative. The recipient nation knows that a risk of loss of prestige is at stake through a public announcement if the initiative fails and will thus treat the announcement more seriously than a private disclosure. Second, a unilateral initiative must accomplish what it sets out to achieve. The firm must follow through with the proposed plan in the market even if that plan proves more expensive than anticipated or simply inconvenient because of changes in company strategy. For example, if the telecommunications firm discussed above311 ceased its educational and technical transfer initiatives there is little doubt that the incessant demands for taxes and fees would immediately resume. Furthermore, the company would risk a backlash from consumers and a reputation that would inhibit the firms efforts to enter future markets. For example, if a firm offered technology training and ambitious hiring of Indian citizens, there is a possibility that local Indian officials would
310 311

Lindskold & Collins, supra note 252, at 680; Boyle & Lawler, supra note 253, at 1186. See supra text accompanying notes 274-289.

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view the plan with enhanced skepticism given the firms failure to keep promises in other markets. Third, the unilateral initiative must be executed on schedule without expectation of an immediate response.312 This establishes the seriousness with which the party treats the initiative. The absence of a demand for a counter-benefit mitigates the perception that the initiative is merely a tactic to take advantage of the opposing party at a later time. The telecommunication firms announcement of a long-term commitment to the Chinese market without concession demands from the Chinese government no doubt enhanced the legitimacy of the firms announcement. Fourth, when a responsive conciliatory act does originate from the opposing party, the initiator should respond by matching with further reciprocal concessions. If the firm receives notice that government officials agree to enforce intellectual property rights more stringently, the firm should immediately respond with an additional conciliatory act. This measure helps create the matching reciprocal norm mentioned above that is effective in establishing conciliatory negotiations. Ideally, the reciprocal norm will not be based merely on exchange of benefits, but on a foundation of trust earned by the multinational based upon its already well-established unilateral initiatives. Fifth, unilateral initiatives are not charity, and should not be implemented without the will to retaliate should it become necessary to do so. Patterns of concessions may imply that the initiator holds a weak bargaining position that should be exploited rather than reciprocated. A firm should be prepared to leverage its market power should a recipient nation begin to exploit the initiative and no reciprocation seems forthcoming. This may include pressuring local government officials, threatening to withdraw or reduce market presence, ceasing technical training or other financial support, or lobbying the USTR to take action. Obviously this should be used as a last resort and only if it is clear that the recipient nation is resolute in abusing the firms market presence. Ideally, the ability to retaliate and not the retaliation itself should encourage developing governments to work with the U.S. firm and discourage exploitation. Sixth, unilateral initiatives must be made with sensitivity to the power relationships of the parties. Unilateral initiatives appear to be most effective when they originate from a user and are received by a target that possesses equal bargaining power.313 Unilateral initiatives may be accompanied by a perception of weakness by the target against the user. Equal bargaining power protects the user of unilateral initiatives from the perception that they have weakened their stance.314 Unilateral initiatives made under unequal bargaining power are more likely to be viewed with suspicion if received by a weaker party and viewed as a sign of weakness if received by a stronger party.315 A stronger nation making unilateral initiatives to a weaker party would have to compensate
Lindskold & Collins, supra note 252, at 680. Edward J. Lawler, Rebecca Ford, et al., Unilateral Initiatives as a Conflict Resolution Strategy, 62 SOCIAL PSYCH. Q. 240 (1999). 314 Id. at 243. 315 Id. at 244.
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for the lack of trust by increasing the size of the initiative. A weaker nation making unilateral initiatives to a stronger party would have to keep that initiative small to minimize weakness perceptions. Finally, unilateral initiatives must be applied sensitively to the individual nation with which the party is dealing with. Bargaining strategies and interpretation of bargaining signals differ across cultures. For example, one author minces no words when describing his view of Russian contractual negotiation strategy: Compromise is not a native word to Russians and, as far as they are concerned, it has more the flavour of "to be compromised" than to make reciprocal concessions to arrive at a mutually agreeable or beneficial agreement. Hence, to many Russians, an offer of compromise is a sign of weakness. The natural impulse of many Russians when provided with an offer of compromise is to go on the offensive, seeking to exploit and to establish dominance. An unreciprocated concession reeks of weakness and invites attack.316 Various researchers examining Soviet negotiation styles in the 1970s and 80s echo these sentiments, calling the Soviet approach to negotiations competitive, stubborn, inflexible, confrontational, uncompromising, tough, hard, and rigid.317 When researchers examined the differences between Soviet and American negotiating styles just before the breakup of the U.S.S.R., the study found similar though less drastic conclusions. Fifty-six Soviets and one hundred sixty American businesspeople participated in simulated one-on-one buyer seller negotiations.318 The study found that Soviet negotiators achieved higher profits when using competitive approaches than their American counterparts.319 Conversely, a cooperative approach by Russian negotiators yielded less favorable
316

Drew Martin, Contractual Aspects of Cross-Cultural Negotiations, 15 MKTNG. INTEL. & PLANNING 19, 21 (1997). Drew also states: Avoid general agreements and focus on details, since the Russians will adhere generally to the strict letter of a contract, but interpret any vagueness to the utmost in their favour. The Russian tendency is to put extreme proposals on the table, to stick doggedly to them through extended negotiations and ultimately to modify them quickly and substantially. The Russians expect that, when this is done, the other side will reject them firmly, thus allowing negotiations to move on in a more realistic basis. You win by demonstrating your seriousness; your adversary will have contempt for you if you give in easily, respect you if you have fought hard. Remember Lenin's adage, "If you strike steel, pull back; if you strike mush, push forward". Russians are good at creating clever contracts which are wordy, ambiguous and omit important details which they can exploit at a later date. Id. John L. Graham, et al., An Empirical Comparison of Soviet and American Business Negotiations, 23 J. INTL BUS. STUD. 387, 395-96 (1992) (citing various studies). 318 Id. at 388-89. 319 Id. at 410.
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results.320 Although the study was published on the eve of the breakup of the Soviet Union, the authors stated that seventy years of communist rule would likely have a persistent behavior on Russian citizens even after the collapse of the Soviet system.321 The aforementioned cultural tendencies in their negotiating strategy will likely impact how Russian citizens and government officials accept a unilateral initiatives approach to protecting intellectual property. If the Russian government or non-governmental organizations relevant to intellectual property protection behave similarly, then the implications of this statement are obvious. Unilateral initiatives may simply not work if the opposing party is so culturally unresponsive to concessions that any initiative is simply a sign of weakness to be exploited. Any multinational must take into account the unique cultural characteristics of the target nation when implementing a unilateral initiative plan. CONCLUSION For at least twenty years, intellectual property rights have been a foremost concern for American companies doing business abroad. United States firms have lobbied their government for a variety of assistance measures, including strengthened international law, augmented domestic statutes, and stiff punishments against non-compliant nations. The result has been an aggressive effort by the USTR, industry, and allied organizations to curb intellectual property violations in developing countries. The effectives of these controversial efforts has been far from certain, while the BRIC economies have taken significant steps towards improving the letter of their intellectual property laws, and initiatives have occurred to enforce these laws, widespread enforcement of intellectual property rights against local and national pirates has remained insufficient. United States representatives push hard for enforcement efforts and stronger judicial penalties on all fronts. The United States government threatens punitive measures against governments who do not comply with sufficient speed. The result, however, is that piracy in the BRIC economies remains as rampant as ever. Piracy will only increase as more and more of their citizens improve their quality of life and generate the consumer drive for DVD players, computers, drugs, and books that make intellectual property piracy so profitable. There is a lesson to be learned from this experience coercion alone cannot unilaterally change the intellectual property practices of developing countries. While the United States still maintains significant leverage over the BRIC economies, particularly India and Brazil, that leverage is bound to decline as the BRICs emerge from their developing state into vibrant mature economies. As the Goldman Sachs report reveals, unless leaders derail current policies towards open market trade and technology development, these economies will dominate the global market place by 2050 and unseat four of the six top economic powers of today. No longer will the United States be able to use coercion alone to compel change. Countersanctions by all four countries will be too harsh to
320 321

Id. Id. at 414.

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resist. National economies will be too intertwined to avoid significant negative thirdparty effects of U.S. sanctions on U.S. interests. The BRICs will no longer be dictated to by a dominant Western power, especially on such a controversial issue as the management of intellectual property in nations accustomed to the discounted market of pirated goods and in some cases culturally disposed toward imitation. Unilateral initiatives represent an important and practical alternative to coercive practice and can be the basis for successfully protecting intellectual property rights abroad. While coercion will no doubt still has its place when advantage taking occurs or all other measures fail, unilateral initiatives by an economically dominant power have the effect of increasing trust between two competing economies and can break lock-in problems between deadlocked representatives. Such initiatives, planned for the long-term, wellpublicized, and backed with the possibility of sanction or withdrawal, can have a significant effect on the targets willingness to bargain. Heinz and the unnamed telecommunications firm both successfully curbed piracy in the Chinese market. Although unilateral initiatives were not the sole reason for their success, they played a significant role in furthering their business goals, shaping consumer sentiment, and generating publicity towards their cause. Other companies using such strategies in any of the BRICs might encounter similar success. Sanctions without reward represent a recipe for failure. Sanctions will have decreasing effects as the BRIC economies mature and develop the ability to respond with their own countersanctions. Sanctions also generate hostility toward the United States and its products. Twenty years of sanctions have had decidedly mixed results, and the probability that will change for the better is unlikely. Unilateral initiatives offer significant potential in creating meaningful intellectual property regimes in the BRIC economies. Unilateral initiatives can foster willingness to cooperate and thereby reduce piracy abroad. The question remains not whether U.S. firms can afford to implement these initiatives, but whether they can afford not to do so as the BRIC economies grow into major actors on the global economic stage.

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