The international community, particularly the US, has long put a high priority on nations respecting patents and copyrights. For the Philippines, demonstrating that it is both sincere and effective in combating piracy and counterfeiting has been a challenge, and intellectual property rights (IPRs) may prove to be a sticking point as the country seeks to enter US-led trade groupings, including the Trans-Pacific Partnership.

BETTER PROTECTION: The Philippines has been on the Watch List of the US Trade Representative (USTR) for two decades, and at times listed on the Priority Watch List. The USTR’s 2013 report noted a number of significant steps towards progress that have been taken by the Philippines, including the modernisation of the country’s copyright enforcement in compliance with the World Intellectual Property Organisation’s internet treaties and the granting of ex officio authority to Customs officers. It also praised the country’s accession to the Madrid Protocol, which took place in March 2012. The Madrid Protocol allows for the registration of marks in a number of countries through the use of a single application. The USTR also recognised a fall in the filming of movies in theatres.

However, the report noted continued deficiencies in the Philippines and said additional measures should be taken to address these. In it, the USTR calls for efforts to deal with piracy over the internet, encourages the adoption of implementing regulations and the clarification of IPR-related laws, recommends better enforcement of criminal IPR-related judgments and also expresses concern about limits placed on certain chemical patents. The government itself says that piracy is still a huge problem despite its efforts to curtail counterfeiting. About 40% of knock-offs are copies of branded merchandise, such as those made by Louis Vuitton. Other product categories include cellphones, CDs and DVDs. Fake medicines have also been found.

CONTINUED VIOLATIONS: In its report on the Philippines in 2013, the International Intellectual Property Alliance (IIPA), an industry group, identified numerous IPR violations. It found the unlicensed software usage rate at 70%, higher than the Asian average of 60% and the world average of 42%, and said that it is common for new computers to come with copied software preloaded and for internet cafes to use unlicensed software. The alliance claimed that journals and textbooks are regularly copied, and in some instances hundreds of books can be burned onto a single disc. It added that internet piracy is also a real problem, with unauthorised file sharing being of particular concern. Illegal content, the IIPA noted, is being loaded onto mobile phones or being sold with hard drives. Finally, it suggested that pay TV signals are being stolen, with local partners often underreporting the number of subscribers.

NO LONGER NOTORIOUS: Most notable is the removal of the Quiapo Shopping District from the USTR’s list of notorious markets in 2012 (the list has been published since 2010). The district was put on the 2011 list for dealing in counterfeit clothing, shoes, watches, handbags and software. The report noted that the government had taken effective enforcement action against Quiapo, and so it was taken off the list, which still includes markets in Indonesia, Thailand and China.

While improving intellectual property rights is seen as an important priority, the situation is complex and is unlikely to be resolved in the near future. Various studies have found that lack of enforcement is only one of the issues. A 2009 report entitled “Why Intellectual Property Rights Infringement Remains Entrenched in the Philippines” argued that economic factors and a simple lack of understanding are also to blame. Meanwhile, the authorities are finding their efforts under-appreciated and are becoming exasperated. They claim that the USTR continually moves the goalposts. Firstly, it wanted the country to deal with its counterfeit goods problem. When the government seized a record quantity of fake merchandise, the USTR changed the focus of its complaint to internet piracy, according to the director-general of the Intellectual Property Office of the Philippines, Ricardo Blancaflor. He has stated publicly that the US authorities have no intention of taking the country off the list regardless of what the government does. Goodwill further deteriorated when a team from the USTR failed to show up in late 2013, blaming the partial shutdown of the US government. Blancaflor said that this was an excuse.

LITTLE IMPROVEMENT: Tensions on the IPR front are set to increase further. Two lobbying groups are pushing to have the Philippines put back on the notorious market list. Business Software Alliance (BSA) and the IIPA, both supported by major intellectual property creators and owners, argue that little overall improvement has been observed. In a filing to the USTR, they claimed that counterfeit goods can still be seen and purchased at locations such as Quiapo, Binondo, Baclaran, Juan Luna Plaza and New Divisoria Malls. Also cited were Makati Cinema Square, Metrowalk and 168 Mall.

The Philippines has been on and off the Watch List and the Priority Watch List for two decades. In this time, the country has taken many necessary steps and made repeated promises that it would improve its protections of IPR. Even so, according to the IIPA, the country has continually failed to follow through effectively on its promises. The Philippines last dropped from the Priority Watch List to the regular Watch List in 2006.

The consequences for not properly protecting intellectual property rights can be severe. A country can potentially lose its right to benefits under the Generalised System of Preferences (GSP), which allows many goods from designated developing countries to enter the US duty-free. Workers’ rights must also be respected for a country to obtain GSP treatment. IPR protection has other potential benefits too. Countries seeking to enter a free trade agreement with the US must put in place a sound intellectual property programme. The same goes for those hoping to accede to the TPP. The Philippines says it may be interested in joining.

SOME FLEXIBILITY: The US is showing some flexibility when it comes to IPR and the Trans-Pacific Partnership (TPP). For instance, the USTR is considering an adjustment of certain patent rights for poor countries, so they can get access to medical drugs earlier and more cheaply. However, it appears that any adjustments will be highly targeted. While the text of the sections in question are complex and still being revised, it appears that the US will insist that patent holders receive the same protections in TPP countries as they do in the US.

The document is still a work in progress, and some key stakeholders, notably Canada and Chile, are pushing for a more relaxed interpretation of IPR. But it is unlikely that the US will change its mind, with the exception of pharmaceuticals for developing countries. For the US, IPR is not an incidental requirement for nations that are hoping to join the TPP. The US is looking at the TPP as a way to improve IPR protection globally.

MOTIVATION: Better IPR is key for the Philippines if it hopes to join the grouping. While it has already passed relevant laws and improved its enforcement record, it needs to get itself removed from the Watch List to have a chance for an FTA with the US or to join the TPP. This might be the motivation it needs, in contrast to the past, when there was no real consequence or opportunity for the country to observe IPR. The USTR was limited to moral suasion, as it was unlikely that the Philippines would lose its GSP privileges just for IPR violations. The country now has a better chance to gain considerable trading rights if it better protects intellectual property. As a result, the Philippines may be properly incentivised to deal with IPR gaps, as the reward for doing so will be the right to join the what may end up being the largest, and freest, free trade group in the world.