Quite simply, from pharmaceuticals to motion pictures to software, India is stealing our stuff. India ranks dead last among major economies in protection of intellectual property rights, according to a comprehensive analysis by the U.S. Chamber of Commerce. And despite lots of talk and visits from Secretary of State John Kerry and Vice President Joe Biden last year, India's respect for property rights has only continued to deteriorate. It's time for the administration to get tough and designate India as a Priority Foreign Country in its 2014 Special 301 Report, making clear that India will suffer consequences if it continues its present course.
The need for this move is being urged broadly by all corners of the U.S. business community. In a detailed public comment filing, the U.S. Chamber strongly recommended the designation for India, noting that in the last year, its "environment deteriorated considerably." A letter filed by more than fifty local business groups along with individual technology and biopharmaceutical companies was even blunter, saying: "We look forward to a Priority Foreign Country designation, India's systematic discrimination against U.S. innovators and its growing theft of U.S. intellectual capital demand no less."
They are right.
Starting in March of 2012, India has issued compulsory licenses for drugs under a new policy requiring local manufacturing, a condition which is clearly illegal under international trade law. The first compulsory license was issued on Nexavar, a Bayer cancer drug. Then they began outright revoking patents, starting with Sutent, on which Pfizer has a clearly valid patent recognized in over 90 countries. Similar moves to revoke and deny valid patents followed against Roche's Tarceva and Novartis's Glivec - even though Novartis was giving away Glivec for free to 95 percent of the Indian market, laying bare any excuse that these moves to seize U.S. property were justified on humanitarian grounds. In the past two years, India has undermined patent rights on at least fifteen medicines.
India is a market of over a billion people. The total cost of bringing a new drug to market is now $1.2 billion according to the Tufts Center for the Study of Drug Development, in part due to regulatory compliance and litigation expenses. Strong protections for the intellectual property rights of innovators are absolutely critical to raise the capital and justify investing it in developing new cures. The greatest threat to such innovation globally now comes from India's misguided policies.
The problems are not limited to drug patents. On the copyright side, the Motion Picture Distributors Association lists India as one of the worst havens for distributors of pirated movies, with new movies appearing on the Internet in India an average of 3.15 days after theatrical release. More than half of all "camcording" of feature films in the Asia-Pacific region happens in India.
The music industry estimates that in 2012 about 90 percent of music downloads in India were unlicensed, at a cost of $431 million to the industry and the artists being ripped off. The software industry estimated in 2011 that 63 percent of PC software was pirated to the tune of $2.9 billion. That means higher prices for the rest of the world.
Voice across the political spectrum have long been sounding alarms.
In a stinging bipartisan, bicameral letter the chairman and ranking members of the Senate Finance Committee and the House Way and Means Committee - Max Baucus, Orrin Hatch, Dave Camp, and Sander Levin - stated: "Beyond any particular action India has taken, the government has enunciated a broader policy objective to develop and support Indian domestic industries by forcing foreign firms to use local facilities and suppliers and transfer their intellectual property to Indian entities."
And ahead of John Kerry's trip to India last year, 40 senators signed onto a letter by Republican Rob Portman of Ohio and Bob Menendez of New Jersey that urged Kerry to "make clear to your Indian counterparts that the United States will consider all trade tools at its disposal if India does not end its discriminatory practices."
But diplomatic pressure still hasn't worked, and it is time to turn up the heat.
Designating Indian as a Priority Foreign Country would lead to a formal investigation by the U.S. Trade Representative and in turn, potentially, to retaliatory sanctions. Nobody wants a trade war with India, of course, but until we show a willingness to get tough, India is unlikely to stop stealing our stuff.