Feb 10, 1989

DECISION ON PANEL RULING AGAINST U.S. PUT OFF TILL NEXT MEETING.

GENEVA, FEBRUARY 8 (IFDA/CHAKRAVARTHI RAGHAVAN) The GATT Council put off till its next meeting a decision on the adoption of the report of a GATT panel which had ruled against the U.S., in its dispute with the European Communities, holding that the U.S. procedures under section 337 of its trade and tariff act were contrary to U.S. obligations in GATT.

The case arose over a dispute between Du Pont of United States and Akzo of Netherlands over patent rights over aramid fibres that Akzo was exporting to the United States.

Du Ponts moved the U.S. International Trade Commission (ITC) under section 337 of the U.S. trade law, and obtained an order prohibiting the imports on grounds of its patent rights violation.

The EEC then raised a dispute in April 1987, and the issue was referred to adjudication in October of that year.

Meanwhile, Akzo and Du Ponts settled their disputes, but the EEC went ahead with its dispute, particularly challenging the section 337 proceedings and procedures of the U.S. as a general proposition.

The panel chaired by Amb. Graham Fortune of New Zealand, and with two eminent independent jurists, Prof. Andreas Lowenfeld of the New York University of Law and Pierre Pescatore, Former Judge of the European Court of Justice, ruled against the U.S. in November 1988. The report sent to the two parties was circulated by GATT in mid-January.

The case revolves around the differences between treatment of imported goods challenged under section 337 as infringing U.S. patent rights, and treatment of equivalent domestically produced goods subject to litigation under U.S. patent law in U.S. federal district courts.

The panel agreed that section 337 procedures were indeed less favourable to imports than those accorded to similarly placed products of domestic origin.

In this view, the panel said that section 337 violated U.S. GATT obligations under article III: 2 (the requirement for national treatment of imported goods), and was not saved by the exceptions in article XX: d, which enabled CPS, in specified circumstances for enforcement of their domestic laws relating to intellectual property protection to act in disregard of GATT obligations.

When the issue came up before the Council Wednesday, U.S. delegate, Michael Samuels argued that the ruling of the panel went beyond issues of national treatment or intellectual property protection, and raised some fundamental questions about domestic trade laws and procedures of countries.

In his view, the ruling required not only national treatment for imported products, but also to persons from whom the products originated. This raised much wider questions.

Samuels also complained about other parts of the panel's rulings and its interpretations of the general agreement.

The EEC delegate, Christoph Bail, however noted that all the points raised now by the U.S. had been agitated before the panel and had been considered by it. The interpretations by the panel about the agreement were not excessive, and the council was not the forum to reagitate the issues.

A number of delegations spoke in support of immediate adoption of the report. These included Canada, Brazil, Japan, Switzerland, South Korea and Norway for the Nordic group of countries.

Several others - Hong Kong, Australia, Egypt, Austria, Israel and Nicaragua - while basically in agreement with the ruling, on the basis of their preliminary reading, nevertheless sought time for their capitals to consider the report before taking a position.

The Community, in agreeing to this, was confident that the report, complex though it was, on further consideration in capitals would be found to be worthy of adoption.