PROTECTING INTELLECTUAL PROPERTY

If there is one trade legislative proposal on which almost everyone seems agreed, it is to give U.S. firms greater protection against foreign violations of patents, copyrights and trademarks - so-called intellectual property.

The Reagan administration, since last year, has been pushing this sort of legislation. The House of Representatives included it in its ill-fated 1986 trade bill. Similar proposals are in the comprehensive trade measure supported by over half of the Senate.But wait. Even here there is vigorous opposition. And in this instance it comes from a highly sophisticated group - the ITC Trial Lawyers Association, which comprises more than 340 attorneys who practice before the U.S. International Trade Commission.

At issue is the Reagan administration proposal to revise Section 337 of U.S. trade law. The section permits U.S. firms to petition the government for bans on imports that are shown to be unfairly traded and injurious to the domestic industry.

In recent years, an increasing number of firms have sought relief under this statute to combat imports that they claim violate U.S. patents, trademarks or copyrights.

If the International Trade Commission finds for the complainant, it may issue the violator a cease-and-desist order or recommend to the president that the imports in question be barred.

Since 1974, about 70 percent of the Sec. 337 cases before the ITC have been resolved in favor of the petitioner. But the administration, apparently responding to business' urgings, wants to ease the criteria for ITC Sec. 337 decisions.

It would enable the government to exclude imports of products violating U.S. intellectual property rights, without any ITC finding that the imports are causing injury to domestic producers.

It also would eliminate the law's requirement that to obtain relief the industry must be operating efficiently and economically. Actually, the administration would not require that there be any domestic industry at all.

Even the House and Senate bills and legislation backed by major business groups do not go quite that far.

The ITC Trial Lawyers Association, whose members argue at the ITC for both complainants and respondents, believes that such proposals to relax Sec. 337's criteria is bad business.

In the end, the association contends, U.S. industry is likely to be more hurt than helped by those changes.

A prime mover for changing Sec. 337 criteria seems to have been Corning Glass Works, which two years ago lost a case it filed at the ITC against Japan's Sumitomo involving a patent for optical wave guide fibers.

The ITC had found patent infringement but ruled there was no injury to Corning. A federal ap peals court upheld the no-injury finding, and even reversed the patent infringement finding.

But such groups as the Business Roundtable, the National Foreign Trade Council and U.S. Chamber of Commerce have joined the call for removing the injury test.

Removing this test, contends the Trial Lawyers Association, would open the United States to legal assaults from other nations. They would be likely, the association says, to challenge Sec. 337 as violating the General Agreement on Tariffs and Trade.

Sec. 337, even with an injury test, already has come under fire at the GATT. In 1983, Canada challenged it, and the European Community is studying whether to raise the matter anew.

Without an injury test, the number of Sec. 337 cases would multiply, the trade lawyers predict. And without the test, it would be much more likely that other nations would retaliate against U.S. import curbs under Sec. 337, they say.

What's more, the trial lawyers warn, the long U.S. effort to win a GATT code cracking down on counterfeited foreign goods could be undone.

Countries already reluctant to negotiate such a code - they include a number of developing nations - could cite a modified Sec. 337 to buttress their arguments, the lawyers say.

In a paper filed with the Senate Finance Committee, the Trial Lawyers Association said, developing countries can be expected to use an amendment to Sec. 337 . . . to influence even developed countries to postpone consideration of a GATT anti-counterfeiting code.

Moreover, the association contends, stripping away the injury test would make the ITC into a kind of international patents court. And, it notes, ITC commissioners rarely have patents expertise. This, it says, will only enflame foreign reactions.

U.S. industry, the trial lawyers point out, has double recourse - at the ITC or in federal court - against intellectual property rights violations by foreigners. Against violations by domestic entities, a complainant can only go to federal court for redress.

That is one more reason to use care in altering Sec. 337, they argue.

Roy Denman, the EC ambassador here, already has cautioned congressional leaders that removing the Sec. 337 injury test would eliminate the only conceivable justification for a separate cause of action for protection of intellectual property rights pertaining solely to foreign products and processes.

He said that could prejudice the negotiation of any agreement in GATT for an international code to protect patents, trademarks and copyrights.

And if the domestic industry requirement in Sec. 337 cases is dropped, the ITC might soon find itself swamped by actions by one foreign firm against another foreign firm, the lawyers caution.

The lawyers are open to modifying the injury test, up to a point. They would sanction a change that would compel the respondent to show that there is no injury. Otherwise, injury would be presumed.

And as this argument over Sec. 337 shows, nothing in the trade legislation pending before Congress can be presumed to be without argument.

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