TTIP's IP Chapter: Nothing to be Gained (Part 2)

It would not be difficult to convince the various constituencies arrayed against the expansion of intellectual property rights to support the removal of the IP chapter from the projected U.S.-European Union free trade agreement (known as TTIP, the Transatlantic Trade and Investment Partnership). Open source advocates, First Amendment partisans, pirates and free riders, as well as ordinary American consumers, see little to be gained from yet another international commitment to strong IP. Eliminating the IP chapter from TTIP should appeal to the U.S. IP industries as well. There is little to gain, and perhaps much to lose, in including an IP component to TTIP. IP zealots (and I'm talking to you, Hollywood) might be better served to await a better day.

As I argued in part 1 of this essay, there is little ground the European counterparty is politically willing or able to give in any TTIP IP negotiations. The TTIP IP chapter is a lightning rod for anti-globalists - and the European Parliament will guard the populist victory it won in quashing ACTA. And neither the United States nor the European Union seem ready to undertake the extremely difficult task of harmonizing substantive IP law across the Atlantic. The Americans and the Europeans seem to share a resignation to let "vivre la différence” in substantive IP rules; each of course would be satisfied by a wholesale capitulation to its respective IP model, yet each recognizes the impossibility of such an outcome. Impending EU substantive IP harmonization - in patent and copyright - pursued through the EU legislative process might be a more favorable opportunity to highlight (with a light touch, of course) the gains to be achieved through transatlantic IP convergence (admittedly moving EU IP law closer to U.S. models).

Leaked reports suggest some Europeans see possibilities for U.S. movement in TTIP with regard to geographical indications (GIs). Perhaps. But the United States clearly recognizes the intense desire of certain European interests for a stronger GI regime (especially with regard to wines). The United States will likely make painful demands of the European Union before making concessions on GIs.

In the end, there is not much new nor important that can form the IP chapter of TTIP beyond simply restating the ongoing general commitment of the United States and the European Union to a high standard of IP protection. And there is a downside to a modest agreement (again from the perspective of those U.S. industries seeking a global advancement in the protection and enforcement of IP rights).

Extraterritorial Government Use of U.S. Process Patents after Zoltek

The federal government -- and its contractors and subcontractors -- have long enjoyed an effective ‘compulsory license’ for the use or manufacture of inventions covered by a U.S. patent. 28 U.S.C. §1498 relaxes the government’s sovereign immunity and supplies a special remedy to the patent holder. The patent holder may recover reasonable compensation from the federal government for the use or manufacture. Thus, a government contractor can carry out a contract without concern for an infringement action; the government will answer any patent holder’s claims.

The operation of Section 1498 applies to both product and process patents. Section 1498 contains an express limitation to any claims ‘arising in a foreign country.’ This limitation, as well as the territorial limitation found in the basic patent infringement statute [35 U.S.C. §271(a)], and their interpretation with respect to process patents, were the basis of the dispute between Zoltek Corporation and the federal government.

The eventual resolution of the Zoltek litigation by the Federal Circuit [672 F.3d 1309] settles various questions of interpretation concerning the extraterritorial dimensions of the government use ‘license’ with respect to process patents -- but it also leaves a rather worrisome ‘gap’ in the coverage of the basic provisions concerning process patent infringement. Consider these two propositions:

1. In the absence of authorization, where every step of a process patent is practiced in the United States, liability under 35 U.S.C. §271(a) results. However, if any step of a process patent is practiced outside the United States, there is no direct infringement. 
2. Where every step of a process patent is practiced outside the United States and the resulting product is imported into or used within the United States, liability under 35 U.S.C. §271(g) results. 

So here’s the gap (and the facts of Zoltek seem to fall into this gap): if a process patent is practiced partly in the United States and partly outside the United States, there may be no liability. This odd result seems to follow from the text of 35 U.S.C. §271(g), which is triggered by the importation or use of a product.