The Intellectual Property Hostage in Trade Retaliation

Intellectual property law has become bound up in a debate about appropriate remedies for violations of the World Trade Organization Agreement. As an alternative to traditional countermeasures that consist of retaliation under the violated agreement, the World Trade Organization (“WTO”) contemplates that violations of one of its covered agreements may be remedied through “cross-retaliation,” or retaliation under another agreement. One form of cross-retaliation has garnered interest in recent years: the threat to suspend intellectual property rights in response to unrelated trade violations.Cross-retaliation through intellectual property rights suspension is theoretically appealing for its potential to avoid problems inherent in traditional retaliatory countermeasures — often tariff increases. Cross-retaliation appears attractive because its strength as a remedy is theoretically dependent on the value of the intellectual property rights at stake, rather than the political or economic strength of the complaining country. Proponents suggest it will solve power differential problems at the WTO while encouraging compliance. Missing from the conversation about cross-retaliation are (1) an assessment of its effectiveness in cases where it has been approved, and (2) an advocate for what I call the “IP hostage” of trade retaliation — that is, an account of the potential costs that may accompany threats to intellectual property rights. This account is useful in explaining why cross-retaliation has not been as effective as its proponents have suggested it would be. This Article fills the gap in the literature by providing case studies of the instances in which the WTO Dispute Settlement Body has approved intellectual property rights suspension as a means of trade retaliation. Based on these case studies, this Article argues that cross-retaliation may be a useful tool in some, limited circumstances, but generally suffers from many of the same problems as traditional retaliatory measures, particularly as they relate to developing countries with smaller economies. Moreover, this Article argues that the unique characteristics of intellectual property rights make it particularly difficult to carry out a threat of cross-retaliation through intellectual property rights suspension. Taking intellectual property rights hostage will not solve problems inherent in the remedial scheme for trade violations