Trade Compliance

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An Unlikely Threat to Free Trade?

Posted March 31, 2014

Forbes contributor Ryan Ellis suggests there’s an emerging threat to the global trend toward a world without tariffs, but it’s perhaps one that you might never have guessed — patent law.

Sheltering domestic industries from the rigors of global competition with protective tariffs has been made increasingly difficult these days owing to near universal membership in the World Trade Organization (WTO). Instead, some governments are, according to Ellis, “experimenting with a new kind of backdoor tariff, one which skirts trade law by creating de facto tariffs in patent laws instead.”

Over the past few years, the governments of France, Taiwan, Japan, and Korea have appropriated significant funds for the purpose of creating Government Sponsored Patent Pools (“GSPPs”).  Although these entities claim to have been initially established to foster domestic innovation and growth through the aggregation of intellectual property, some have evolved into government sponsored patent trolls by engaging in anti-competitive protectionist behavior, such as filing lawsuits targeting foreign companies and granting special privileges to domestic companies.

According to Ellis, if left unabated by WTO or Congressional action deeming certain activities of GSPPs as unfair trade practices, these “experiments in using bogus patent royalty claims as a proxy for a new round of protective tariffs” threaten to undermine the principles of free trade and could eventually create “a new tariff regime just as stifling as the old one.”

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