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86–386 2015

A TANGLE OF BARRIERS: HOW INDIA’S 

INDUSTRIAL POLICY IS HURTING U.S. COMPANIES 

HEARING 

BEFORE THE

SUBCOMMITTEE ON COMMERCE, MANUFACTURING, 

AND TRADE 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

JUNE 27, 2013 

Serial No. 113–62 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

(II) 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

RALPH M. HALL, Texas 

JOE BARTON, Texas 

Chairman Emeritus 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

Vice Chairman 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

CORY GARDNER, Colorado 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILL JOHNSON, Missouri 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

HENRY A. WAXMAN, California 

Ranking Member 

JOHN D. DINGELL, Michigan 

Chairman Emeritus 

EDWARD J. MARKEY, Massachusetts 

FRANK PALLONE, JR., New Jersey 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

JERRY MCNERNEY, California 

BRUCE L. BRALEY, Iowa 

PETER WELCH, Vermont 

BEN RAY LUJAN, New Mexico 

PAUL TONKO, New York 

(III) 

SUBCOMMITTEE ON COMMERCE, MANUFACTURING, AND TRADE

LEE TERRY, Nebraska 

Chairman 

LEONARD LANCE, New Jersey 

Vice Chairman 

MARSHA BLACKBURN, Tennessee 

GREGG HARPER, Mississippi 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVE B. MCKINLEY, West Virginia 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

GUS M. BILIRAKIS, Florida 

BILL JOHNSON, Missouri 

BILLY LONG, Missouri 

JOE BARTON, Texas 

FRED UPTON, Michigan, ex officio 

JANICE D. SCHAKOWSKY, Illinois 

Ranking Member 

G.K. BUTTERFIELD, North Carolina 

JOHN P. SARBANES, Maryland 

JERRY MCNERNEY, California 

PETER WELCH, Vermont 

JOHN D. DINGELL, Michigan 

BOBBY L. RUSH, Illinois 

JIM MATHESON, Utah 

JOHN BARROW, Georgia 

DONNA M. CHRISTENSEN, Virgin Islands 

HENRY A. WAXMAN, California, ex officio 

(V) 

C O N T E N T S 

Page 

Hon. Lee Terry, a Representative in Congress from the State of Nebraska, 

opening statement ................................................................................................ 1 

Prepared statement .......................................................................................... 2 

Hon. Henry A. Waxman, a Representative in Congress from the State of 

California, prepared statement ........................................................................... 3 

Hon. Leonard Lance, a Representative in Congress from the State of New 

Jersey, opening statement ................................................................................... 5 

Hon. Marsha Blackburn, a Representative in Congress from the State of 

Tennessee, prepared statement .......................................................................... 6 

Hon. Fred Upton, a Representative in Congress from the State of Michigan, 

prepared statement .............................................................................................. 92 

WITNESSES

Linda Menghetti Dempsey, Vice President, International Economic Affairs, 

National Association of Manufacturers .............................................................. 7 

Prepared statement .......................................................................................... 9 

Mark Elliot, Executive Vice President, Global Intellectual Property Center, 

U.S. Chamber of Commerce ................................................................................ 19 

Prepared statement .......................................................................................... 21 

Roy Waldron, Chief Intellectual Property Officer, Pfizer, Inc. ............................ 30 

Prepared statement .......................................................................................... 32 

Robert Hoffman, Senior Vice President of Government Relations, Information 

Technology Industry Council ............................................................................... 39 

Prepared statement .......................................................................................... 41 

John Smirnow, Vice President, Trade and Competitiveness, Solar Energy 

Industry Association ............................................................................................ 48 

Prepared statement .......................................................................................... 50 

Rohit Malpani, Director of Policy and Advocacy, Medecins Sans Frontieres— 

Access Campaign .................................................................................................. 54 

Prepared statement .......................................................................................... 56 

SUBMITTED MATERIAL

Letter of June 20, 2013, from the Ambassador of India to Hon. Erik Paulson, 

submitted by Mr. Terry ....................................................................................... 94 

Letter of June 26, 2013, from the Telecommunications Industry Association 

to the committee, submitted by Mr. Terry ......................................................... 96 

Statement of the California Healthcare Institute, submitted by Mr. 

McNerney .............................................................................................................. 97 

Statement of Public Citizen, submitted by Mr. McNerney .................................. 99 

(1) 

A TANGLE OF BARRIERS: HOW INDIA’S INDUSTRIAL POLICY IS HURTING U.S. COMPANIES 

THURSDAY, JUNE 27, 2013 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON COMMERCE, MANUFACTURING, AND

TRADE, 

COMMITTEE ON ENERGY AND COMMERCE, 

Washington, DC. 

The subcommittee met, pursuant to call, at 10:00 a.m., in room 

2123, Rayburn House Office Building, Hon. Lee Terry (chairman of 

the subcommittee) presiding. 

Present: Representatives Terry, Lance, Blackburn, Harper, Guthrie, Olson, Kinzinger, Johnson, Upton (ex officio), Sarbanes, 

McNerney, Matheson, Barrow, and Waxman (ex officio). 

Staff Present: Kirby Howard, Legislative Clerk; Nick Magallanes, 

Policy Coordinator, CMT; Andrew Powaleny, Deputy Press Secretary; Shannon Weinberg Taylor, Counsel, CMT; Michelle Ash, 

Minority Chief Counsel; and Will Wallace, Minority Professional 

Staff Member. 

OPENING STATEMENT OF HON. LEE TERRY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEBRASKA 

Mr. TERRY. All right. If we could take our seats. Appreciate this. 

We will gavel in, and I will go ahead and start my opening. 

I appreciate everyone joining us for today’s hearing, which will 

focus on a very timely issue of how India’s trade policies are affecting U.S. companies and the broader impact these policies may have 

on the American economy. For a long time India has been considered a close trading partner and friend of the United States. Since 

the 1990s, U.S. trade in goods with India has flourished into a relationship with nearly $600 billion a year. In the last decade alone, 

the U.S. has become India’s second largest export market. And this 

relationship is not completely one-sided. In 2012, the U.S. exported 

about $20 billion in goods to India, making it our 18th largest export market, a large percentage of these exports being defense related, which is critical to maintaining strong ties with one of our 

closest military allies in the region. 

Unfortunately, after all this progress, we are starting the see 

some significant and worrisome policies, particularly those related 

to intellectual property being adopted by the Indian Government 

over the last 2 years. These developments could pose a threat to 

the budding trade relationship. 

2 

Guided by their national manufacturing policy, India has begun 

engaging in a growing pattern of unfair and discriminatory trade 

practices which are directly harming U.S. companies in a wide variety of sectors, especially pharmaceuticals, energy technologies 

and information and communication technologies. 

A clear example is the case of Bayer drug Nexavar. In March 

2012, India issued what is called a compulsory license for this product, which meant that the Indian Government was going to allow 

an Indian company to receive technology owned and developed by 

others without any of the cost of research and development, which 

averages about a billion dollars for a new drug to come to market. 

Bayer is not alone in its struggles with the India Government. 

Pfizer has had a patent for its breakthrough cancer drug Sutent revoked twice and it is currently going through another legal process. 

And in April 2013, Novartis, a company I am proud to say has 

a large manufacturing facility just outside of my district, has a patent for Gleevec, and that has been denied. 

Unfortunately, practices like these described above have clear 

consequences, less money spent on research, less money spent on 

development, and less innovation and breakthrough cures reaching 

dying patients all over the world, including India. 

The pharmaceutical industry is not alone when it comes to American innovators being significantly harmed by India’s policies. The 

U.S. solar panel industry has been exporting hundreds of millions 

of dollars’ worth of U.S. made solar panels and solar cells. However, since 2010 India, as a part of its national solar mission, began 

requiring that these products be sourced locally, which is contrary 

to the established rules under the original General Agreement on 

Tariffs and Trade and WTO rules. 

The Indian Government also has announced regulations pertaining to preferential market access for electronic goods. This 

mandate would set locally manufactured content requirements for 

procurement of several electronic goods for public and private sector entities. Concerns of GATT violations have been raised by these 

mandates as well. 

I am hopeful that the Secretary of State Kerry can visit or revisit 

these issues, with Vice President Biden’s visit coming up shortly 

thereafter. I am further hopeful that the administration will continue to raise this issue with the Indian Government at the highest 

levels. 

Now, this committee is deeply concerned about the long-term effects these actions may have on U.S. companies, our manufacturers 

and our workers. It is my hope that throughout our involvement 

in TTIP and TPP, our representatives will work to ensure that no 

signatory to these treaties tolerate these type of offenses. 

And I will yield back my time and recognize the gentleman from 

California, Mr. Waxman. 

[The prepared statement of Mr. Terry follows:] 

PREPARED STATEMENT OF HON. LEE TERRY

I appreciate everyone joining us for today’s hearing which will focus on a very 

timely issue: how India’s trade policies are affecting U.S. companies and the broader 

impact these policies may have on the American economy. 

3 

For a long time, India has been considered a close trading partner of the United 

States. Since the 1990s, U.S. trade in goods with India has flourished into a relationship worth nearly $60 billion a year. In the last decade alone, the U.S. has become India’s second largest export market. And this relationship is not completely 

one-sided: in 2012 the U.S. exported about $20 billion in goods to India, making it 

our 18th largest export market. A large percentage of these exports being defense 

related, which is critical to maintaining strong ties with one our closest military allies in the region. 

Unfortunately, after all this progress, we are starting to see significant and worrisome policies-particularly those related to intellectual property-being adopted by the 

Indian government over the past two years. These developments could pose a threat 

to a budding trade relationship. 

Guided by their National Manufacturing Policy, India has begun engaging in a 

growing pattern of unfair and discriminatory trade practices which are directly 

harming U.S. companies in a wide variety of sectors-especially pharmaceuticals, energy technologies and information and communications technology. 

A clear example is the case of Bayer’s drug, NEXAVAR. In March of 2012, India 

issued what is called a compulsory license for this product-which meant that the Indian government was going to allow an Indian company to receive technology owned 

and developed by others without any of the costs of research and development— 

which averages over $1 billion for a new drug to come to market here in the U.S. 

Bayer is not alone in its struggles with the Indian government. Pfizer has had 

the patent for its breakthrough cancer drug, SUTENT, revoked twice, and it’s currently going through another legal appeal. And in April 2013, Novartis, a company 

I am proud to say has a large manufacturing facility in Nebraska, has its patent 

for GLIVEC, denied. 

Unfortunately, practices like the ones described above have clear consequences: 

less money spent on research, less money spent on development, and less innovative 

and breakthrough cures reaching dying patients all over the world, including in 

India. 

The pharmaceutical industry is not alone when it comes to American innovators 

being significantly harmed by India’s discriminatory trade practices. 

The U.S. solar panel industry had been exporting hundreds of millions of dollars 

worth of U.S. made solar panels and solar cells. However since 2010, India, as part 

of its ‘‘National Solar Mission,’’ began requiring that these products be sourced locally, which is contrary to the established rules under the original General Agreement on Tariffs and Trade and WTO rules. 

The Indian government has also announced regulations pertaining to Preferential 

Market Access for electronic goods. This mandate would set ‘‘locally manufactured’’ 

content requirements for procurement of several electronic goods for public AND private sector entities. Concerns of GATT violations have been raised by these mandates as well. 

I am hopeful that Secretary Kerry’s recent visit and Vice President Biden’s upcoming visit will have an effect, and convey a message that resonates with the Indian government. I am further hopeful that the administration will continue to raise 

this issue with the Indian government at the highest levels, and at every opportunity during bilateral negotiations. 

This committee is deeply concerned about the long-term effects these actions may 

have on U.S. companies and workers. It is my hope that throughout our involvement in the TTIP and TPP, our representatives will work to ensure that no signatory to these treaties tolerate these types of offenses. 

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. WAXMAN. Thank you, Mr. Chairman. India, the world’s largest democracy, is an important ally and trading partner for the 

United States. It is also a market full of potential for U.S. companies, boasting the second largest population, a strong workforce, 

and a rising middle class. 

U.S. companies are well positioned to take advantage of these opportunities if there are fair trade rules in place in India and the 

United States. Unfortunately, there are areas where it appears 

India is pursuing policies that may be inconsistent with its interVerDate Nov 24 2008 12:23 Feb 02, 2015 Jkt 037690 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-62 CHRIS
4 

national trade obligations. These practices are damaging both 

American and Indian competitiveness in the world economy. 

For example, India has given preferences to its local solar suppliers. These actions appear to violate international trade agreements and the United States is challenging them at the World 

Trade Organization. India also has threatened to institute local 

preferences for hardware and software development, which would 

be of great concern. 

Likewise, India’s treatment of the entertainment industry deserves close scrutiny. Bollywood and Hollywood are successfully collaborating on a range of projects, but India’s investor restrictions 

lacks enforcement against piracy and the absence of strong anticamcording laws undermine this partnership. 

The issue is more complex, however, in the area of pharmaceutical patents, which is an issue that has received special attention. The 2005 WTO Agreement on Intellectual Property, known as 

TRIPS, gives countries clear flexibility with respect to access to 

medicines. The Doha Declaration adopted in 2001 allows developing countries to adopt health safeguards by compulsory licensing 

when necessary to protect the public health. 

Without question, India is still a developing country with a third 

of its population living in extreme poverty. About 2.4 million people 

are living with HIV/AIDS. Nearly 2 million each year develop tuberculosis. Over 30 million have diabetes, and cancer cases are rising. For many, the price of medicine is the difference between life 

and death. 

We need to be able to differentiate between pharmaceutical 

measures in India that genuinely advance public health and those 

that are unfair to patent holders. When India seeks to prevent patent abuses like evergreening that artificially delay generic competition, it may be acting within the authority granted by the Doha 

Declaration. 

India also plays a critical role by producing one-fifth of the 

world’s generic medicines, half of which are exported. In the battle 

against HIV/AIDS, Indian generics have brought the cost of HIV 

treatment in the developing world from $10,000 to $335 per patient 

per year. Brand name drug companies may not like it, but the reality is that India’s robust generics market supplies affordable essential drugs both to its citizens and to developing nations around 

the world. If India is pressured to make its patent laws more stringent than its obligations under international trade law require, this 

crucial supply of medicines could be threatened. 

In fact, the United States itself has benefited from these low cost 

generics. Our Nation purchases Indian generics through the 

PEPFAR Program for AIDS Relief and the Global Fund to Fight 

AIDS, TB, and Malaria. To date, generic procurement for PEPFAR 

alone has saved the U.S. Government $934 million while bringing 

lifesaving treatment directly to more than 5 million people. 

That is why we need to recognize that while we are addressing 

complex and important issues today, there are nuances, not one approach to all, and I look forward to this hearing and to the testimony. I want to apologize to the witnesses. There is another hearing that is going on at the same time, and I will be back and forth, 

5 

but I will have a chance to review your testimony and hopefully get 

back here to ask you some really tough questions. 

Thank you, Mr. Chairman. 

Mr. TERRY. All right. Thank you, Mr. Ranking Member. 

And at this time I recognize the vice chairman of the subcommittee, Mr. Lance, for 5 minutes, and then if you would yield 

to Marsha when you are finished. 

OPENING STATEMENT OF HON. LEONARD LANCE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW JERSEY 

Mr. LANCE. Certainly, be happy to do so. Thank you, Mr. Chairman, and good morning to our distinguished panel. I welcome everyone to this important hearing on our important trade relationship with India. Throughout the last two decades, the United 

States developed a prosperous trade relationship with India that 

has been advantageous to both countries. Bilateral trade and goods 

with India has increased from fewer than $6 million in 1992 to 

more than $62 billion in 2012. Already, throughout the first 4 

months of this year, we are trading more with India than we did 

in the first four months of 2012. We have become India’s second 

largest export market and India has become our 18th largest export market. 

Additionally, New Jersey’s Seventh Congressional District, which 

I have the honor of representing, has many pharmaceutical, communications, and information technology companies benefit from 

trade with India. It is an emerging trade relationship that I hope 

can further flourish in the future. 

However, in the past few years, concerns have been raised about 

the future of the trade relationship. These concerns center on India’s recent enacting of trade barriers that discriminate against our 

Nation’s exporters and are inconsistent with India’s international 

agreements as well as its lack of action on intellectual property 

rights protection and enforcement. 

In the health and telecommunications fields, these trade barriers 

adversely affect companies in the district I serve, in the State I 

serve, and in my judgment, the United States. Particularly troubling is India’s actions as it relates to the United States’ intellectual property laws. Last year the Indian Patent Office revoked the 

patent for Sutent, an anti-malaria drug manufactured by Pfizer. 

The Indian Government also issued a compulsory license on a 

Stage 3 liver and kidney cancer drug. I am concerned that the Indian Government’s interest in its growing pharmaceutical market 

is clouding the decision-making process as it relates to intellectual 

property, harming United States companies. 

The United States must exhibit leadership in the area of protecting IP rights. Emerging companies that adopt the Indian model 

of intellectual property policy making also pose a risk to United 

States companies. We must make it clear to all trading partners 

that these policies set a bad precedent and undermine our mutually beneficial trade agreements. 

I look forward to examining ways that the United States and 

India can continue to grow strong trade and investment relationships while leveling the playing field for U.S. exporters operating 

6 

in India and protecting the intellectual property rights of our companies here at home. 

And I am pleased to yield to the vice chair of the full committee, 

Congresswoman Blackburn. 

OPENING STATEMENT OF HON. MARSHA BLACKBURN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TENNESSEE 

Mrs. BLACKBURN. Thank you. And I want to welcome all of you. 

This is an important hearing. 

When I was running the Tennessee Film Entertainment and 

Music Commission back in the mid-1990s, I spent a lot of time 

working on property rights and protecting U.S. innovators, and because of that, I really share the frustration with our job creators 

and our innovators that what is happening with foreign governments who are constantly trying to undermine our intellectual 

property and use it for their benefit and gain. 

When you look at India’s industrial policy, trade barriers, the 

rampant piracy, the tax discrimination and what appears to be an 

absolute disregard for our intellectual property rights, you realize 

that India is a country that is not willing to play by the rules right 

now. What is worse is that they are trying to gloss over this, and 

here is an example. Last week, the Indian Ambassador sent a letter to any office defending their abusive practices that are killing 

jobs of millions of hardworking Americans. India’s principal set a 

disappointing example to the rest of the world. No country that 

calls itself a friend of the U.S. would celebrate isolationism the way 

that India is doing. It is a shame that India’s government has gone 

as far as they have to threaten our bilateral relationship, U.S. 

trade and foreign investment. 

Tennessee’s IT, bio, pharmaceutical, chemical, ag, medical equipment, and other manufacturing sectors are all subject to India’s 

punishing rules, taxes and regulations. It is no wonder we have 

overwhelming bipartisan agreement in Congress that India’s government must reverse course or risk seriously threatening our bilateral relationship. 

I have gone over my time. I yield back. 

Mr. TERRY. Thank you. 

At this time I am going to introduce our witnesses here today 

and thank all of you for being here. We will begin with Linda 

Menghetti Dempsey, who is with the National Association of Manufacturers, and then to Mark Elliott, Executive Vice President, Global Intellectual Property Center, U.S. Chamber. Then Roy Waldron, 

who is Chief Intellectual Property Officer with Pfizer, and then Jim 

Smirnow, who is Vice President in Trade Competitiveness at the 

Solar Energy Industry Association. Robert Hoffman, Mr. Hoffman 

is the Senior President of Government Relations for Information 

Technology Industry Council. Then Rohit Malpani, who came here 

from Geneva, and no, not Geneva, Nebraska, and he is Director of 

Policy and Advocacy for—why don’t you say it. 

Mr. MALPANI. Doctors Without Borders, or Medecins Sans 

Frontieres. 

7 

Mr. TERRY. All right. Well, Doctors Without Borders, if that was 

on there, would have been easy for me to pronounce. That is our 

panel, and we will start then with Linda. You are first. 

STATEMENTS OF LINDA MENGHETTI DEMPSEY, VICE PRESIDENT, INTERNATIONAL ECONOMIC AFFAIRS, NATIONAL ASSOCIATION OF MANUFACTURERS; MARK ELLIOT, EXECUTIVE VICE PRESIDENT, GLOBAL INTELLECTUAL PROPERTY 

CENTER, U.S. CHAMBER OF COMMERCE; ROY WALDRON, 

CHIEF INTELLECTUAL PROPERTY OFFICER, PFIZER INC.; 

JOHN SMIRNOW, VICE PRESIDENT, TRADE AND COMPETITIVENESS, SOLAR ENERGY INDUSTRY ASSOCIATION; ROBERT HOFFMAN, SENIOR VICE PRESIDENT OF GOVERNMENT 

RELATIONS, INFORMATION TECHNOLOGY INDUSTRY COUNCIL; AND ROHIT MALPANI, DIRECTOR OF POLICY AND ADVOCACY, MEDECINS SANS FRONTIERES—ACCESS CAMPAIGN 

STATEMENT OF LINDA MENGHETTI DEMPSEY 

Ms. DEMPSEY. Thank you. Good morning, Chairman Terry, members of the subcommittee. I welcome the opportunity to be here 

today to testify on behalf of the National Association of Manufacturers, the NAM, the Nation’s largest industrial trade association 

with 12,000 small, medium and large manufacturers in every sector throughout all 50 States. 

A tangle of trade barriers is an apt description of the significant 

and growing challenges that manufacturers in the United States 

are facing in India. The U.S.-India commercial relationship is a 

longstanding one. Our countries were cofounders of the world trading system with the creation of the GATT in 1948, which later became the World Trade Organization, which has helped the global 

economy expand. 

Manufacturers in the United States have long sought closer economic ties with India, particularly as India began opening its economy. Over the last decade, that relationship has grown. The United 

States is India’s second largest export market, and we share a $60 

billion relationship in manufacturing trade. 

Manufacturers in the United States have faced challenges in the 

Indian market from very high tariffs and weak intellectual property protection and enforcement to complex and expensive regulatory processes. But over the last year-and-a-half we have seen a 

much broader and more damaging industrial policy being implemented in India that seeks to grow its economy at the expense of 

ours, to advantage Indian manufacturers while undermining manufacturers here in the United States. 

For example, consistent with its national manufacturing policy 

issued in 2011, India has undertaken a number of actions across 

a range of sectors. India’s preferential market access rules would 

impose local content requirements on the purchase of information 

and communications technology that could easily capture half of India’s market. 

In the clean energy sector, India is mandating local content and 

considering expanding that rule to technologies that comprise the 

bulk of U.S. solar exports to India. India bans imports of remanufactured medical imaging devices and other equipment while allowVerDate Nov 24 2008 12:23 Feb 02, 2015 Jkt 037690 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-62 CHRIS
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ing sales of such equipment as long as it is remanufactured in 

India. India has recently denied or revoked patents for nearly a 

dozen innovative medicines. This includes medicines that were either distributed in India free of charge or sold at a fraction of their 

cost. India imposes price caps on hundreds of medications but only 

on foreign products, not ones those that Indian researchers develop. 

Indian tax authorities are increasingly imposing discriminatory 

taxes on U.S. business. We have other critical concerns, including 

barriers to foreign direct investment, particularly in telecommunications as well as requirements to use local information infrastructure that inhibit cross-border data flows. 

My business colleagues will go into more detail on many of these 

concerns, but what is clear to the NAM and our manufacturers 

throughout the United States is that these policies really have no 

other purpose than to favor India’s domestic corporations, many 

and strategic state favored and state advantaged sectors at the expense of manufacturing and jobs here in the United States. 

These actions are no way for a responsible stakeholder and rising 

global power to treat its second largest trading partner. They are 

counterproductive to India’s own goals of attracting foreign investment and developing its own innovative economy. These actions are 

inconsistent with international norms and some of them are inconsistent with India’s obligations under the GATT, now WTO, that 

India helped create more than 65 years ago. 

Without an immediate and purposeful response, India’s industrial policy could spread and be applied to other products and sectors, and it sets an unfortunate example for other countries that 

are sure to follow. And it makes it difficult to see how India and 

the United States can move effectively forward on new initiatives 

and a stronger relationship, such as a bilateral investment treaty 

that really could have a chance to help forge a stronger commercial 

relationship. 

To demonstrate our resolve and press for real results, the NAM, 

GIPC, Solar Energy Group joined with 13 other trade associations 

last week to form the Alliance for Fair Trade With India, AFTI. Together we are asking the Obama administration to address this 

issue at the highest levels and to end discrimination against American exports. 

We seek a level playing field and a fair shake in India. We want 

India to end its discriminatory industrial policy and unfair trade 

practices and ensure those practices are not repeated. 

We understand Secretary of State Kerry raised these issues during this week’s U.S.-India’s strategic dialogue and we hope and expect the Indian Government will respond positively and work constructively with the manufacturing community to address and resolve these issues quickly. 

A strong bilateral trade and economic relationship is essential to 

achieving our strategic aims with India. To have that kind of partnership we all want, India must play by the rules. Thank you. 

Mr. TERRY. Well done. 

[The prepared statement of Ms. Dempsey follows:] 

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Mr. TERRY. And now recognize Mr. Elliott, and you have 5 minutes. 

STATEMENT OF MARK ELLIOT 

Mr. ELLIOT. Thank you, Chairman Terry and distinguished members of the Subcommittee on Commerce, Manufacturing and Trade. 

The U.S. Chamber of Commerce appreciates your leadership and 

the opportunity to testify today on how India’s industrial policies 

are hurting U.S. companies. Today I am going to focus my testimony on an array of IP concerns that the U.S. Business community 

has in India. 

According to the U.S. Department of Commerce, U.S. IP industries account for $5 trillion of the Nation’s GDP, 60 percent of exports and employ 40 million Americans. In short, intellectual property drives knowledge economies. 

In 2010, the then President of India declared the next 10 years 

to be India’s decade of innovation. Unfortunately, recent events in 

India suggest otherwise. Particular policy, regulatory and legal decisions have deteriorated IP rights in India, making India an 

outlier in the international community. 

Last December, the Chamber released an International IP Index 

comparing intellectual property environments across 11 key markets. This was the first comprehensive national IP index and it 

ranked India consistently last behind Brazil, China and Russia in 

nearly every indicator. This trend is bad for India, it is bad for investment and it is bad for international trade. 

I would like to provide the committee with a few specific examples of industries’ concerns. With respect to the much needed copyright legislation that passed India’s parliament last year, the end 

result failed to achieve the objective of the legislation, which was 

to implement the WIPO Copyright Treaty. The recording and music 

industry estimate lost revenue to piracy of $431 million in India. 

India’s reported rate of PC software piracy in 2011 was 63 percent, 

an estimated commercial value of $2.9 billion. 

India finds itself an outlier with respect to taxation when it 

comes to development centers within India. It currently assesses 

tax by allocating a share of the company’s worldwide operating 

profits, despite the fact that the centers within India bear no financial risk and they don’t own the resulting IP. This methodology is 

inconsistent with international practice and is not accepted by U.S. 

tax authorities, resulting in controversy and double taxation. 

India has also shown disregard for intellectual property rights of 

the biopharmaceutical industry as stated. There have been at least 

five globally recognized patents that have been revoked, denied or 

compulsory licensed within the last 12 months. 

While some may claim that these are unrelated policy, regulatory 

and legal decisions, the fact remains that these attacks on the 

pharmaceutical patents are only happening in India. 

And this is not just about access to medicines, as some may have 

you believe. For example, in the case of Gleevec, Novartis provided 

the drug free of charge to 95 percent of the 16,000 patients suffering from leukemia. The remaining 5 percent were heavily subsidized. It is also worth noting that the Indian generic now charges 

20 

$2,100 annually for a generic version of the drug that Novartis was 

providing for free. 

There are currently more than 5,000 innovative drugs in development around the world at the moment, and the industry has invested $5 billion in R&D since 2000. The medical innovation system is clearly working, and India’s recent behavior undermines the 

global IP environment that protects and encourages this innovation. 

For IP-intensive industries, the protection of IP rights is one of 

the most important factors companies consider when investing in 

a particular market. We have heard from a dozen industry and 

trade associations that the erosion of intellectual property rights in 

India will impact their members’ decisions to invest there. 

There are, however, leaders in India who recognize the importance of investment and innovation. On May 11, the current President of India noted that India’s innovation bottom line is not very 

encouraging, as the number of patent applications filed annually in 

leading countries like the U.S. and China are roughly 12 times 

more than that of India. He called upon the private sector to increase their share of spending on research and development to the 

levels prevalent in other key markets such as the United States, 

Japan, and South Korea. 

One very obvious way to increase this investment and innovation 

would be for the Indian Government to raise IP standards to the 

same levels that encourage business to invest in the United States, 

Japan, and South Korea. 

We thank the subcommittee for holding this hearing, and we look 

forward to working with you to address business concerns in India. 

Mr. TERRY. Thank you, Mr. Elliot. 

[The prepared statement of Mr. Elliot follows:] 

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Mr. TERRY. Now Mr. Waldron, you are recognized for 5 minutes. 

STATEMENT OF ROY WALDRON 

Mr. WALDRON. Thank you, Chairman Terry and members of the 

subcommittee, for the opportunity to testify at today’s hearing. My 

name is Ray Waldron. I am Pfizer’s Chief Intellectual Property 

Counsel. In that capacity, I am responsible for overseeing and protecting Pfizer’s IP portfolio worldwide. 

Pfizer was founded in 1849 in New York and we are 

headquartered in New York today. Pfizer employs more than 

90,000 individuals globally, including over 30,000 people in the 

United States. 

I would first like to express Pfizer’s appreciation for work by this 

committee to promote jobs, innovation and enhanced patient safety 

through the recent reauthorization of PDUFA. Through major research efforts, Pfizer is developing the medical solutions that will 

matter most to the people we serve. Specialized efforts in 

biosimilars as well as orphan and genetic diseases also illustrate 

our dedication to develop and deliver innovative medicines and vaccines that will benefit patients around the world. 

Pfizer’s R&D pipeline include several potential breakthrough 

medicines in Phase 3 clinical trials. These include treatments for 

breast cancer, cardiovascular disease, psoriasis and meningitis. 

Unfortunately, recent events in India threaten our IP and undermine our ability to innovate, create jobs and provide faster access 

to lifesaving medicines. My testimony today will highlight Pfizer’s 

serious concerns about these events, their impact on the U.S. and 

the industry and their potential spillover effect into other markets. 

IP-intensive industries directly and indirectly support 40 million 

U.S. Jobs, drive over 60 percent of exports, and pay on average 40 

percent higher than other industries that do not rely on IP. 

PhRMA member companies invest over $54 billion annually in 

R&D. The path to a successful breakthrough cure is an arduous 

one. On average, it takes more than $1 billion and around 10 to 

15 years of research to develop a new medicine. Our R&D ultimately becomes the IP that allows us to create new medicines. Effective IP laws and predictable transparent enforcement of these 

laws are essential. 

For the biopharmaceutical industry, IP protection enables us to 

continue to invest in new research and development for medicines. 

Pfizer’s future growth and the jobs that come with that growth will 

depend on our ability to engage on a level playing field in all global 

markets. 

India is one such market. Pfizer has been operating in India for 

over 60 years. We have R&D and manufacturing facilities in 

Mumbai, Thane and Goa. We are a leading company in India in 

terms of innovation and employee satisfaction. Despite our commitment to India, over the past year we have seen a rapid deterioration of the innovative environment in the country. India has undermined patent rights for at least nine innovative medicines, including one of ours. 

A recent history of compulsory licensing, discriminatory interpretation of the patent law, and refusal to enforce patents strongly indicate that India is an outlier in recognizing IP rights. These nine 

31 

innovative medicines have received patent protection in countries 

throughout the world. This recent history not only recreates significant uncertainty in the market but also undermines our ability to 

invest and compete fairly in India. 

Pfizer’s recent experience in India demonstrates a flagrant disregard of patent rights. In the last year, Pfizer has struggled to defend its patent for the compound sunitinib, the active ingredient in 

Sutent against efforts to revoke it. The patent has now been revoked twice under questionable legal theories and is currently back 

in force pending new proceedings before the Indian Patent Office, 

which is an administrative body under the Ministry of Commerce 

and Trade. 

Each of the earlier revocations was reversed when Pfizer showed 

that its rights to a fair hearing and due process had been denied. 

During the back and forth of the revocation proceedings, one generic manufacturer launched its product in the Indian market, and 

as a result, the market is now flooded with 2 years’ worth of supply 

from this manufacturer. 

In order for there to be effective patent protection, the system of 

IP enforcement ought to include mechanisms to recall infringing 

goods from that market. I would also like to note that to ensure 

Sutent is available to patients who need it, Pfizer developed a patient access program in India which provides 80 percent of the patients taking Sutent with a complete or partial subsidy. 

Pfizer exists to invent and manufacture high quality medicines 

to improve the health and well-being of patients around the world. 

To achieve this goal, effective, predictable and enforceable IP protections are essential. India’s actions to undermine the incentives 

needed to make investment to develop new medicines and a hostile 

environment to IP will have a devastating impact on R&D investment in both the U.S. and India and cause significant harm to U.S. 

jobs and economic growth. 

India’s protectionist and discriminatory policies, which exploit 

U.S. IP to benefit their own industry requires an equally bold response. It is important that we view these actions for what they 

are, industrialist policies to benefit the competitiveness of India’s 

own domestic industry. 

We appreciate the focus you have provided on this issue today 

and look forward to working with members of this committee and 

other stakeholders to identify and implement solutions that will 

benefit innovators and patients in the U.S., India and worldwide. 

Thank you very much. 

Mr. TERRY. Thank you, Mr. Waldron. 

[The prepared statement of Mr. Waldron follows:] 

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Mr. TERRY. And now Mr. Hoffman, you are recognized for 5 minutes. 

STATEMENT OF ROBERT HOFFMAN 

Mr. HOFFMAN. Thank you, Mr. Chairman, and thank you to the 

members of this subcommittee, Vice Chairman Lance. We appreciate the opportunity to appear today. I am Robert Hoffman, Senior 

Vice President for the Information Technology Industry Council, 

ITI. ITI represents 52 of the most dynamic innovative companies 

in hardware, software, and services. We obviously, given the strong 

presence of IT in India, consider the bilateral relationship between 

U.S. and India to be an extremely important one for our industry. 

For the overall economy in the United States, there is no question that the bilateral economic ties have been relatively recent in 

development. It certainly can be said that the big reason why that 

is the case is because for at least the first 44 years of Republic of 

India’s existence, Cold War politics and a socialist largely closed 

economy really made the development of commercial ties very difficult. All of that changed in the 1990s, when in response to economic and monetary crisis, the government of India took steps to 

gradually open its economy. It also coincided, by coincidence, with 

the information technology boom of the 1990s and the development 

of the information and communications technology industry in 

India. 

There is no question that the combination of market opening reforms and letting the IT industry in India operate in an open fashion, utilizing market incentives and taking advantage of investments in education and an entrepreneurial and innovative team of 

people in the IT industry, it has had some extraordinary significant 

effects in India. It has literally helped move hundreds of millions 

of people off of extreme poverty. It has also helped it triple the annual GDP growth rate in India all within two decades. 

If liberalization is allowed to continue and market-based incentives are allowed to move forward and innovators and entrepreneurs in India are allowed to flourish, some have estimated that 

India’s middle class can number well over 500 million people. Put 

that in prospective, when the U.S. population is 300 million people. 

This is all very exciting, and from our perspective, as India considers options to develop a manufacturing base, our recommendations are pretty simple. You have seen market-based innovation 

work in the IT sector. You have seen what your innovators and entrepreneurs can do in India. Turn them loose. We are Exhibit A 

that it can work. 

Unfortunately, and this leads to my second point, and as many 

of my colleagues here on the panel have already demonstrated, 

India appears to be moving in the opposite direction and is preparing to throw its economy in reverse and undermine the gains 

that we have seen in the last two decades. Let me provide a couple 

of examples. 

Frankly, I have been to India several times and I have to tell you 

that one of the frustrating aspects of visiting with government officials is that the economic success stories of the last two decades 

haven’t been fully grasped within the bureaucracy in India. We see 

it in the random and oftentimes troubling enforcement measures 

40 

taken by tax and customs officials. Another example is the fact that 

India is sitting right now on the sidelines while we are negotiating 

expansion of the Information Technology Agreement. 

The ITA, which was agreed to in the mid-1990s, was extremely 

helpful to India as it pursued its objectives in IT. An expanded ITA 

would actually help their efforts to advance their manufacturing 

initiatives. So we are very surprised to see them on the sidelines. 

Last but not least, we are very troubled by their recent efforts 

to impose what amounts to a forced manufacturing policy on electronics products in India. The fact of the matter is, right now, if 

you want to sell to the government of India, you have got to manufacture electronics products within the Republic of India, and there 

are some serious concerns that is this policy is going to be expanded to the private sector and all you have to do is look at the 

Economic Times of India’s front page story today that talks about 

how it plans to expand this policy with telecom operators, and if 

it is allowed to continue, they will expand this forced manufacturing requirement, you know, all the way into other sectors, including financial services and energy. 

So, we are obviously very concerned. We are trying to encourage 

the government of India, working with people like the—organizations like the U.S. Chamber of Commerce and NAM and other institutions worldwide, to get India on the right track, toward more 

economic liberalization utilizing market-based incentives. We have 

to be very careful that if they go down the road of forced manufacturing, it could have a contagion effect and encourage other countries to do the same thing. 

The fact is, if you look at countries like China and Brazil, forced 

localization is a pretty addictive drug, and frankly, what we really 

need here is a little policy intervention. We consider India a valued 

friend, collaborator, and competitor, but the fact of the matter is 

friends don’t let friends get addicted to forced localization. 

So, thank you, Mr. Chairman, and we appreciate again the opportunity to appear here today. 

Mr. TERRY. Doesn’t necessarily fit on a bumper sticker, but—— 

Mr. HOFFMAN. No. Give me a couple of days, though. 

Mr. TERRY. All right. Thank you, Mr. Hoffman. 

[The prepared statement of Mr. Hoffman follows:] 

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Mr. TERRY. Mr. Smirnow, you are now recognized for 5 minutes. 

STATEMENT OF JOHN SMIRNOW 

Mr. SMIRNOW. Mr. Chairman, and members of the committee, 

thank you for the opportunity to appear before you today. The 

Solar Energy Industry Association, or SEIA, represents over 1,000 

solar businesses operating within the United States, including 

leading U.S. solar manufacturers and exporters. Today, solar employs over 120,000 Americans and more than 5,600 companies, 

most of which are small businesses. Solar is also one of the fastest 

growing industries in American. 

My testimony today will focus on India’s growing use of an industrial policy which discriminates against U.S. Solar exports, thereby 

providing an unfair competitive advantage to India’s domestic solar 

manufacturers. 

With some of the best solar resources in the world and the cost 

of solar continuing to decline, India’s solar sector is poised for explosive growth, providing an important export opportunity for U.S. 

solar manufacturers. Indeed, over the past few years, as the chairman indicated in his opening statement, U.S. solar panel manufacturers have contracted to supply hundreds of millions of dollars of 

solar exports to India. 

Importantly, most of these exports are comprised of U.S. solar 

panels based on thin film technology. A company called First Solar, 

headquartered in Arizona with manufacturing operations in Ohio 

is the leading global producer and innovator of this technology, and 

this is indeed a leading, cutting edge U.S. technology. 

At the same time, however, India’s solar policies have increasingly turned inward. In 2010, India adopted a local content requirement as part of the country’s National Solar Mission. While we 

fully support India’s desire to promote solar manufacturing both as 

an economic development tool and a solution to climate change, India’s government support measures must be consistent with India’s 

international trade obligations. India’s solar local content requirement, however, is a direct violation of these obligations. 

One of the arguments we hear in support of the local content 

measure is that it is necessary to nurture the growth of a young 

industry, particularly in an environment of intense global competition. But while local content requirements may provide some protection for domestic manufacturers, they also stifle innovation, 

limit a country’s access to next-generation technologies and increased costs, not to mention the fact that local content requirements are explicitly prohibited by global trading rules. 

Returning to the specifics of India’s solar industrial policy. The 

national solar mission is divided into three phases. Under the first 

tranche of Phase I, India required that eligible products—projects 

based on crystalline silicon technology, that is the other half of the 

solar panel industry, versus thin film, and that is where the U.S. 

has a technological advantage, in this first phase, India required 

that one-half meet a local content requirement for cells, and solar 

cells are the heart of a solar panel for this technology. 

So while U.S. companies could sell cells into India—or they could 

sell modules but they weren’t able to sell cells, U.S. origin panels 

were thus barred from competing. 

49 

For the second tranche of Phase I, India broadened this local content requirement to mandate that National Solar Mission products 

use only crystalline silicon cells and panels manufactured in India, 

a significant lost opportunity for U.S. exports. Looking forward, we 

are concerned that India will expand its local content requirement 

yet again to cover thin film technology, effectively targeting hundreds of millions of dollars of U.S. exports. Our only hope is that 

the U.S. Government’s recent decision to initiate a WTO case 

against India will eventually cause India to reverse course. 

The U.S.-India dispute follows on the heels of a recent WTO finding that Ontario, Canada’s local content requirement for solar 

goods, substantially similar to India’s, violated Canada’s WTO obligations. In response, Canada has indicated that the solar program 

will be brought into compliance with the WTO decision, which we 

presume means that Canada will remove the local content provision. India should follow Canada’s lead today and remove the local 

content provision from its National Solar Mission. 

As important context, the U.S. Government first tried to establish a collaborative dialogue with India regarding the local content 

requirement but was rebuffed. The U.S. case was therefore a last 

ditch effort to get India to the table. 

I want to make clear that we support the overall objectives of India’s National Solar Mission and its focus on growing a solar manufacturing base. We just don’t support the discriminatory aspects of 

it. 

That concludes my remarks. I will be happy to answer any questions. Thank you. 

Mr. TERRY. Thank you very much. 

[The prepared statement of Mr. Smirnow follows:] 

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Mr. TERRY. And now the gentleman, Mr. Malpani, you are now 

recognized for 5 minutes. 

STATEMENT OF ROHIT MALPANI 

Mr. MALPANI. Thank you, Mr. Chairman, and good morning. My 

name is Rohit Malpani, and I am the Director of Policy and Analysis of Doctors Without Borders. 

Mr. TERRY. Is your mic on? 

Mr. MALPANI. Yes, it is. Doctors Without Borders and Medecins 

Sans Frontieres. MSF is an international medical humanitarian organization which provides impartial medical assistance to those affected by armed conflict, epidemics, exclusions from healthcare or 

natural disasters. Today, MSF carries out this work in more the 70 

countries worldwide while raising awareness on neglected crises 

and advocating for improved medical tools and protocols. 

As a medical treatment provider, MSF is able to speak about the 

relationship between intellectual property rules and access to medicines and about the role India has played in enabling millions access to lifesaving medicines. 

In 2001, MSF faced what seemed like insurmountable barriers in 

meeting critical health needs in saving the lives of our patients. In 

particular, we faced an astronomical $10,000 per person per year 

price tag for lifesaving HIV medicines which barred treatment for 

millions and prevented us from being able to reach more than a 

very limited number of patients. 

But is a solution was found in India. The country, free from having to grant patents on medicines until 2005, was able to manufacture low-cost quality generic medicines for a fraction of the existing 

price. Literally overnight the cost to treat someone with HIV fell 

by over 96 percent to $360 per patient per year. Generic competition has seen the cost fall even further. As a result, more than 9 

million people worldwide now receive treatment for HIV, many of 

those from PEPFAR-funded programs. 

India’s role in this treatment scale-up has been and continues to 

be a critical one. As the pharmacy to the developing world and the 

biggest source of quality generic medicines, governments and donors such as the United States rely heavily on Indian generic medicines. Ninety-eight percent of the medicines used in American taxpayer funded treatment programs rely on low-cost generic medicines manufactured in India. 

Today India is a full member of the World Trade Organization 

providing patent protection for medicines. Between 2005 and 2008, 

India granted over 2,000 patents for medicines and continues to 

grant patents today. These patents delay generic competition, 

which keeps costs high and places enormous burden on treatment 

providers such as MSF, Ministries of Health in low-income countries and donor governments, including the United States. 

While India does reward genuine innovation with 20-year patents, it manages to strike a balance between providing intellectual 

property protection and having the flexibility to protect public 

health. This balance is possible as both the TRIPS agreement and 

the Doha Declaration on TRIPS and public health enshrines the 

right of WTO members to implement safeguards and flexibilities. 

One safeguard under TRIPS is the right of governments to define 

55 

strict patentability criteria. Governments have the right to define 

scope of patentability in a way that addresses the needs of their 

own citizens as long as they abide by international agreements. 

The United States recently contributed to its own definition 

when the Supreme Court reaffirmed strict patentability criteria for 

gene patents. India has adopted a standard of pharmaceutical patenting that is stricter than in the United States or the European 

Union, which is in line with international trade rules. In rejecting 

one patent application by Novartis on assault of an already known 

substance, the Indian Supreme Court was legally validating the 

choice by the Indian Government that patents should only be 

granted when those products represent a genuine advance over 

older versions of medicines. 

By contrast, the United States has decided to approve secondary 

patents for very obvious modifications of existing medicines which 

often delays generic competition and keeps prices high. This is a 

practice commonly called evergreening by which the drug industry 

extends their monopoly on drugs beyond the originalpatent’s 20 

years. Allowing companies to extend patent protection and keep 

prices high is expensive for U.S. consumers and the U.S. Government. 

A second legally recognized safeguard to overcome barriers of affordable access is the right to issue compulsory licenses. The 

United States Government used compulsory licenses for medicines 

in the past and stated that it would look to them in the future, if 

necessary. In India, a compulsory license was granted in the interest of public health when the country was faced with a price tag 

for a cancer drug which kept it out of reach of 98 percent of those 

eligible for treatment. Granting a compulsory license reduced the 

price by 97 percent while recognizing the innovation behind the 

drug through the payment of a 7 percent royalty. 

The U.S. Government continues to make adjustments to its patent system to achieve a better balance between rewarding innovation and providing for public health needs. It should allow other 

governments like India to do the same. The measures taken by the 

Indian Government do not undermine innovation but rather curtail 

excesses of the patent system and ensure that companies focus 

their energies on scientific and not legal innovation. 

Governments around the world and U.S. assistance programs are 

straining under high costs for new medicines. In times of economic 

austerity, we should remember that high medicine prices are an 

issue of life and death for millions of people. Ensuring that balanced innovation systems make those medicines available to those 

who need the most is imperative. 

Thank you again for the opportunity the provide testimony on 

this important topic. 

Mr. TERRY. Thank you, Mr. Malpani. I appreciate your testimony. 

[The prepared statement of Mr. Malpani follows:] 

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Mr. TERRY. And for the record, unanimous consent to submit a 

letter from the Ambassador of India in response to several Members objecting to the patent and trademark issues. Hearing none, 

we will submit that for the record. And also a letter from Advancing Global Technologies, TIA, to me and Jan Schakowsky, our letter from Grant Siefert. 

Any objections? None heard. So ordered. 

[The information appears at the conclusion of the hearing.] 

Mr. TERRY. And you have another one. All right. A little business 

before we have questions. 

Mr. MCNERNEY. I have two documents to submit for the record. 

Mr. TERRY. All right. Go ahead. 

Mr. MCNERNEY. Mr. Chairman, I have two documents to submit 

for the record, one from the California Healthcare Institute, and 

this one, I think, is submitted to the House committee on the Tangle of Trade Barriers: How India’s Industrial Policy is Hurting U.S. 

Companies. 

Mr. TERRY. With no objection heard, so ordered. 

Mr. MCNERNEY. OK. The second one is by the Public Citizen, 

‘‘India’s Patent System Plays By WTO Rules and Supports Global 

Health.’’ I would like to submit this for the record. 

Mr. TERRY. Hearing no objection, so ordered. 

[The information appears at the conclusion of the hearing.] 

Mr. TERRY. All right. Now the fun. Question, and no pun intended. Well, actually it is. I am going to ask a fairly generic question to the panel, but obviously with the practices of India in the 

last couple of years and compulsory licensing practices and seeming 

court orders to usurp patents or deny a patent, this seems to be 

an economic development policy issued by the state. 

Now, how political do you think these protectionist measures 

are? Is India continuing to head in even a deeper protectionist direction or does the government simply flow with the trade winds, 

so to speak. And if you can keep it within about 45 seconds per answer, I want to go straight down the panel, and we will start with 

you, Ms. Dempsey. 

Ms. DEMPSEY. Thank you, Mr. Chairman. From our perspective, 

what we are seeing in India today is a reversal, of course, from the 

liberalization they were inching along in, and it is a broad policy 

across a bunch of different sectors. Intellectual property is a key 

piece of it. Localization is another piece. But it is a move to shut 

their economy, to try to grow their economy at the expense of ours 

in the United States and other foreign countries. 

Mr. ELLIOT. I would agree with Linda’s statement. I would add, 

I think that there are mixed signals that often come out of the political hierarchy there. The President has made some very positive 

statements, but clearly the direction of the company is going in another direction. So, it is a situation where quite often the rhetoric 

is very different to what is happening in the real world, and the 

real world seems to suggest that India is heading in a very wrong 

direction. 

Mr. WALDRON. I would say, for the pharmaceutical sector, that 

there most definitely is a protectionist bent towards protecting 

their own industries. In fact, when the patent law was implemented in 2005, there were explicit statements about protecting 

77 

and designing a law to protect local interests and the ability for 

those companies to maintain their export markets. So there definitely is a concerted policy, and even looking at the Supreme Court 

decision on the Gleevec decision, it is clearly within there that the 

protection of export markets is intended. 

Mr. HOFFMAN. To your initial point, Mr. Chairman, you can’t escape the political dynamic that is currently going on in India. You 

have a country that is within one year of elections at the national 

level and elections that are considered to be very tight. That said, 

I agree with my fellow panelists that the trend is more in the direction of protectionism, while there is certainly a bit of discussion of 

sorts that is going on internally with the Indian Government. I 

think what raises the level of concern is that currently heading the 

government was the architect of the opening of the government of 

India, the Prime Minister saying when he ran the Finance Ministry 

in 1991, essentially, you know, opened the doors not just for the 

overall economy but for the IT industry. So when you have someone of that stature who has a free market background, yet various 

departments and agencies are pursuing protectionist measures that 

give a lot of us here cause for concern. 

Mr. TERRY. OK. 

Mr. SMIRNOW. I think India, first and foremost, sees the role 

long-term—— 

Mr. TERRY. The microphone. 

Mr. SMIRNOW. I think India sees, as a lot of countries do, the 

long-term opportunity of solar energy, particularly as a job creator, 

and so that really is their focus. 

The current global environment for solar, we have massive overcapacity, and so it is difficult for young companies and a young industry, which is India is trying to grow to compete in that environment of intense global competition. So that really, I think, is the 

motivator for them to utilize the local content requirement to protect this young industry, but it is the wrong mechanism and there 

are a variety of other solutions they could turn to that would be 

WTO consistent. 

Mr. TERRY. All right. Mr. Malpani. 

Mr. MALPANI. We know that the TRIPS agreement, under which 

these rules are formulated, specifically create exceptions for public 

health and public interest, and we think that is the reason why 

India is using their rights and flexibilities. 

We heard a statistic that there is a 500-million person market 

in India today for various technologies. There is another 500 million people in India without clean water and electricity today as 

well as millions of other people in the developing world. 

The other thing to remember is the concept of separation of powers, which is so sacred in the United States. These decisions at the 

Patent Office and at the Indian Supreme Court are done by the judiciary, not by the executive or legislative branch, and I think 

India maintains that same separation of powers as United States 

has with its patent decisions. 

Mr. TERRY. Well, that concludes my time. And I recognize the 

gentleman from California, Mr. McNerney, for his 5 minutes of 

questions. 

78 

Mr. MCNERNEY. Thank you, Mr. Chairman. This is a very important hearing. As we know, the United States, we take a lot of pride 

in our intellectual properties and our innovation. And we want to 

see that take place in India within a framework that benefits both 

countries. And we don’t seem to be hearing that that is what is 

going on there. So I appreciate the testimony that we have heard 

this morning. 

But I would like to sort of make one point first. Mr. Malpani, I 

was going to ask you to explain evergreening, but you did a pretty 

good job in your testimony. I just want to ask is that one instance 

of a progressive policy adopted by India which is putting it ahead 

of many of the other countries. Is that one example then? 

Mr. MALPANI. India’s policy on evergreening is one actually that 

has also been adopted by other countries, sometimes in parallel to 

India and sometimes afterwards. This is a flexibility that is fully 

recognized under the TRIPS agreements. Actually, the United 

States itself had a more strict patentability standard in the past, 

which has been loosened up over the last few decades, and which 

has led to this profusion of secondary patents that delay generic 

competition far beyond 20 years. This, in our opinion, has been 

done specifically both to protect the public interest, to ensure that 

the patent term does not exceed 20 years except for genuine innovation, and it is also we think to encourage real innovation instead 

of simply trying to encourage legal innovation on behalf of drug 

companies. 

There is a study in the United States which shows that secondary patenting and evergreening leads to an additional 6 years 

of patent protection for medicines in this country, which thereby 

creates higher costs for consumers and for the health care system. 

Mr. MCNERNEY. Thank you. Mr. Smirnow, I am a very big proponent of clean energy technology. Let me ask are there Indian 

trade rules that target the United States specifically? 

Mr. SMIRNOW. The local content provision that I am concerned 

about does not target the United States specifically. It is any import into India of the technology at issue. Though India has initiated an anti-dumping duty case that includes the United States. 

That case is in the preliminary stage. It targets the United States, 

China, Taiwan, and Malaysia. So that would be one example where 

there are some activities that are targeting the United States. 

Mr. MCNERNEY. Can we work collaboratively with them to help 

resolve those barriers, or is that something that they are pretty 

firm in right now? 

Mr. SMIRNOW. Yes, I hope so. And I think there is an opportunity 

and a responsibility of industry to build some bridges with India 

in the renewable space. Over the past couple years, SEIA has been 

working with the leading solar trade associations in Europe and 

Asia to find ways to collaborate. We haven’t yet built those bridges 

with India, and we need to. And I think I commit today to reach 

out to the Indian solar industry and start building those bridges. 

I also think there is an opportunity to inject trade into some of 

these collaborative efforts that the State Department, Department 

of Energy are engaged in right now. 

Mr. MCNERNEY. Thank you. Mr. Hoffman, it is good to see you 

here in the committee. What specific recommendations would you 

79 

have for India so that it can build its electronic and telecommunication equipment production capabilities without resorting to these 

localization practices? 

Mr. HOFFMAN. Well, first and foremost, do what works. Rely on 

the market-based incentives that have created an extraordinary IT 

industry all over India. That is first. Second, it should have joined 

the ITA expansion talks. They are at the end stages. They could 

still potentially join and sign the ITA expansion. That was extraordinarily helpful to provide the IT industry in India with duty-free 

treatment of products that enabled them to build the infrastructure 

that they needed to succeed. As a number of my panelists know, 

manufacturing is very IT-enabled these days. So you can use those 

same building blocks in ITA expansion. And so we are hopeful that 

perhaps they will ultimately join with the expanded ITA. 

Mr. MCNERNEY. It sounds like there are steps that they are 

aware of that will help them actually improve their economy without resorting to these localization practices. 

Mr. HOFFMAN. And I do want to make one concluding point, Congressman. Right now, I mean you saw—I waved it around, but you 

saw the article in the Economic Times of India, I can certainly provide it to the staff to distribute to the members of the subcommittee, but they are on the cusp of taking their forced electronics manufacturing policy into the private sector. And we would 

strongly urge them to basically, you know, stand pat. We believe 

to go further forward would be very disruptive to their own economy, to our own, and to other governments and industries around 

the world. So they literally have their toes on the line. We know 

that there are discussions going on internally within the government not just in terms of where to put it through with the private 

sector, but there is also talk about applying it to software. So we 

hope that they will keep those toes on the line and not proceed forward. 

Thank you. 

Mr. MCNERNEY. Thank you. 

Mr. TERRY. Thank you. The gentleman’s time has expired. And 

the chair recognizes the full committee chair, Mr. Upton, for 5 minutes or as long as he wants. 

Mr. UPTON. Five minutes will be good. Thank you, Mr. Chairman. I appreciate everyone’s testimony this morning. I just want 

to say when I first learned of this issue just a few short weeks ago, 

from Pfizer, the largest employer in my district, it has been amazing how many other companies walking to vote, doing a variety of 

different things that we do, a number of different companies have 

come up and shared with me their exact same story about trouble 

with India. And Mr. Waldron, I also want to thank you for your 

kind words in regard to the committee’s work on enacting PDUFA 

last year. Every member of this committee, Republican and Democrat, was a strong supporter. And we were able to carry that ball 

down the field and get it through the Senate and to the President. 

The question that I have, Pfizer, you have been there some 60 

years now in India, Mr. Waldron. What is different now? What is 

happening that is different now from the landscape prior to the creation of their IP regime? Can you walk us through some of the 

things that have happened? 

80 

Mr. WALDRON. Yes. In the early days we were primarily a consumer health company in India. Our biggest products were vitamins and cough syrups. With the change in the law, it was expected there would be the support mechanism of IP to help us introduce innovative medicines into the market there. 

Mr. UPTON. And that lured you in more, right? I mean that lured 

more investment into India? 

Mr. WALDRON. Yes. To launch a new drug into a market is a 

costly adventure. And you do have to provide medical education. It 

is an advance for a market like India to receive almost immediately 

the benefits of a new innovative medicine from the innovator. So 

this is of great value and importance to patients in India. And I 

couldn’t stress more that having that support mechanism in place 

does allow us to do what we do best. 

Mr. UPTON. Now, in your testimony, and I was late coming to the 

hearing for a variety of other important reasons, but you indicated 

that since early 2012 India’s policies and actions have undermined 

patent rights for at least nine innovative medicines. Many of these 

medicines have received patent protection in most countries across 

the world, suggesting that India is an outlier in recognizing and 

enforcing patent rights. This is not only creating significant uncertainty in the market, but it also undermines our ability to compete 

fairly in India and our willingness to invest there. 

Are you actually considering reductions in investment in India? 

What is the landscape that you are looking at in the future as it 

relates to that? 

Mr. WALDRON. I think it is too early to comment on what decisions may or may not be made going forward. I think it is going 

to be a matter of whether one can continue to do and introduce 

those products without a support mechanism to do it. I think we 

have to see, and time will tell, whether the environment becomes 

so hostile that you just have to retreat. 

Mr. UPTON. Now, the argument on the other side from the Indian 

Government, they have repeatedly stated that they have a complete ecosystem supporting a well settled, stable, robust intellectual 

property regime. Specifically, they go on to say that multinational 

companies like Pfizer have been granted many patents in India. 

How do you respond to that claim? 

Mr. WALDRON. Well, the Patent Office has been very active since 

the adoption of the patent law in 2005 in issuing patents. But it 

is really important to note that the issuance of a patent is only significant if a right actually attaches to that piece of paper. What we 

complain of at this point is that notwithstanding the existence of 

these documents that are issued from the administrative agency, 

when you try to enforce or try to give them meaning they sort of 

fail in the breach. A lot of the filings that happen in India, or at 

least worldwide, are very early stage scientific things. So a lot of 

the things that you see pending or have been allowed are probably 

things that are in the phase one, phase two stage, and have not 

yet reached the commercial stage, but I would say enforcement in 

the breach is where it really matters when you are talking about 

IP rights. 

81 

Mr. UPTON. Have you had any help from the administration in 

terms of the Trade Rep or any of the Federal agencies here in 

terms of complaints that have gone forward? 

Mr. WALDRON. We have been speaking with USTR and the administration, and we are very hopeful that this issue has been 

raised during Secretary Kerry’s visit to India, and hopefully that 

this dialogue will continue. This is very important that these issues 

be raised in bilateral discussions with India so that they understand that we really are serious about this. So I expect going forward that we will at least have this. And I have seen to date that 

the issue has gotten some traction. 

Mr. UPTON. Well, hopefully this hearing will elevate the cause as 

well. 

I yield back. Thank you. 

Mr. TERRY. Thank you. And now the chair recognizes the full 

committee ranking member, Mr. Waxman. 

Mr. WAXMAN. Thank you, Mr. Chairman. In November 2011, Secretary of State Hillary Clinton said that if we make smart investments based on sound science and a shared global responsibility we 

can save millions of lives and achieve a goal once considered unthinkable, an AIDS-free generation. We have made remarkable 

progress toward that goal. The United States, through its PEPFAR 

program, has helped hundreds of thousands of people each year 

avoid contracting HIV, and now provides direct support for the 

antiretroviral treatment of more than 5 million people with HIV. 

That is three times the number that were supported as recently as 

2008. But there is still a long way to go. 

In India, the focus of today’s hearing, there are more than 2 million people infected with HIV. Worldwide, there are 2.5 million new 

HIV infections a year. And in this difficult spending environment, 

even the budget for PEPFAR was recently cut. In these circumstances, if we are to achieve our goals, low cost medicines must 

play an essential role. 

Mr. Malpani, what are the provisions of the TRIPS agreement 

that permit countries certain flexibilities on intellectual property 

rights, and what purpose do they serve? And how are these reinforced in the Doha Declaration? 

Mr. MALPANI. Thank you for the question. Just to reiterate that 

treatment is prevention for HIV today. It leads basically to 100 percent reduction in the transmission of the virus. And for the first 

time in history, we have a chance at defeating HIV. The TRIPS 

agreement and the flexibilities included in the TRIPS agreement 

can play an important role in ensuring affordable generic medicines. As I mentioned in my testimony, the scope of patentability 

clause in the TRIPS agreement allows countries and governments 

to define what is patentable or not so they can prevent 

evergreening and long terms of monopoly protection. There is also 

provisions around compulsory licensing which allow governments 

to exercise patents to allow the importation or production of generic 

medicines to bring down costs and to protect public health. There 

are also other provisions in the TRIPS agreement that allow the 

early working of drug patents to allow generics to enter the market 

when a patent expires. This is used in the United States, as well 

as parallel importation of medicines, which is not in the United 

82 

States, but which is used across much of the developed and developing world. 

Mr. WAXMAN. The United States was among more than 140 

countries to agree to the Doha Declaration, which clarified the circumstances under which countries may issue a compulsory license 

on a patent. 

Can you talk specifically about India’s compulsory license on the 

Bayer drug Nexavar and the Supreme Court decision regarding the 

patentability standards for the Novartis drug Gleevec? And in your 

opinion is India acting within its obligations under the TRIPS 

agreement? 

Mr. MALPANI. Yes. We do believe that in both situations the government has acted within the scope of the TRIPS agreement. With 

respect to the decision with Novartis, the issue at hand is whether 

or not the measure that India has used to strike down the patent 

on imatimib mesylate is under the TRIPS agreement. And we believe it does. It is part of the three-part test under the TRIPS 

agreement for defining what is inventive. It is not an additional 

provision under the three-part test of the TRIPS agreement. It 

specifies what is an inventive medicine under TRIPS. 

Similarly with respect to compulsory licensing, we believe that 

India used compulsory licensing under public health grounds to ensure an affordable price for the medicine. And in the order issued 

by the Indian Patent Appeals Board, it specifically mentioned that 

public health and affordability of the medicine was grounds for the 

compulsory license. 

Mr. WAXMAN. As I mentioned at the beginning of my questioning, the U.S. has set a goal for an AIDS-free generation. Can 

you talk about the possibility of countries expanding the scope of 

patentability for certain drugs or establishing TRIPS-plus patent 

standards and how that could affect our ability to reach our goal? 

Mr. MALPANI. We are enormously concerned with many measures that occur right now, especially the United States, for instance, which is negotiating the Trans-Pacific Partnership, which is 

seeking to go constrain the ability of governments to both oppose 

patents through an oppositional process, as well as broadening the 

definition of scope of patentability so that the patent system ends 

up importing many of the frivolous patents that are often granted 

in the United States and the European Union. We also see a lot 

of bilateral pressure upon governments not to impose a strict 

standard of patentability to ensure that only high value patents 

that actually reward true innovation are being granted. So it is not 

only in the bilateral relationships, it is also through free trade 

agreements and through other measures which is leading to a 

broadening of the scope of patentability and leading to longer patent terms. 

Mr. WAXMAN. Most PEPFAR recipients currently receive first 

line antiretrovirals, which are typically generic drugs, and off patent, but after taking these drugs for some time, many patients develop drug resistance, requiring second line antiretrovirals, which 

cost the U.S. Government 135 percent more because many are 

brand name and on patent. 

You mentioned in your testimony about Abbott’s application for 

a secondary patent for an important second line antiretroviral 

83 

drug. Can you comment generally about how secondary patents on 

some of these brand name drugs could affect PEPFAR’s ability to 

deliver affordable antiretrovirals to individuals who develop drug 

resistance in first line drugs? 

Mr. MALPANI. Yes. We are facing what is known as a treatment 

time bomb today. All AIDS patients must switch to new second and 

third line medicines to continue treatments. And because these 

medicines are under patent, including in India and other countries, 

the costs are skyrocketing for our patients also. For one key third 

line drug produced by Merck, we have to pay $1,800 per patient, 

more than 10 times the cost of first line medicines. 

Mr. WAXMAN. Thank you, Mr. Chairman. 

Mr. TERRY. Thank you, Mr. Waxman. And now recognize for 5 

minutes the vice chair of the subcommittee, Mr. Lance. 

Mr. LANCE. Thank you, Mr. Chairman. And I apologize to the 

panel for being in and out this morning. There are several hearings 

this morning of this full committee. And I want to assure every 

member of the panel that I think this is an incredibly important 

issue. 

Mr. Waldron, Dr. Waldron, Counselor Waldron, many titles, you 

have testified that 80 percent of the users of your drug Sutent receive a complete or partial subsidy. It is my understanding that 

one of the arguments of the Indian Government in ordering a compulsory license is that drugs are needed for public health because 

the drugs are otherwise out of reach for Indian patients. Isn’t it 

true, however, that Indian-made generics are priced out of range 

for most of the population? And so therefore how is it in the interests of public health to manufacture a drug that is cost prohibitive 

when 80 percent of the Indian drug consumers are already receiving a drug from the patent holder either free or at a steep discount? 

Mr. WALDRON. Yes. Thank you. Thank you, Vice Chairman, for 

that question. It is one of the misperceptions that increased generic 

entry means more access to medicines. And that is part of the problem that is facing us in this debate. From 1972 to 2005, there were 

no patents protecting innovative compounds in India, yet only 20 

percent of the population in India had access to medicines. Eighty 

percent did not. Even now that figure is better than in the period— 

I think it is about 30 percent now have access to medicines, versus 

an earlier period where there were no patent protections. So the 

connection between patent protection and access to medicine is 

somewhat tenuous at best. We really have to look at mechanisms 

that do increase access to medicines. I mean we agree with the ultimate objectives of MSF—— 

Mr. LANCE. Of course. As do we all. 

Mr. WALDRON [continuing]. And PEPFAR. And these are objectives that we all want to work towards. But I think the difference 

is in the mechanisms to get there. Compulsory licensing and abrogating the IP system really doesn’t seem to be—have a linear relationship between that and increased access to medicines. Or at 

least that hasn’t been shown anywhere in which this has been exercised. 

Mr. LANCE. Thank you. I would be interested in your opinion regarding the Supreme Court’s decision, the Indian Supreme Court 

84 

decision, in the Novartis Gleevec case. As I understand your testimony, you believe that it is inconsistent with the Indian obligations 

under the WTO agreement on Trade-Related Aspects of Intellectual 

Property Rights, TRIPS. Could you explain the position of Pfizer 

regarding that issue? And I understand there may be a disagreement on the panel. I would be interested in your position. 

Mr. WALDRON. Yes. When you speak about drug development, I 

mean you have the development of an active pharmaceutical ingredient and then you have subsequent innovation that occurs after 

the identification of that active ingredient. Sometimes the active ingredient is not bioavailable. You give it to a patient, it goes right 

through their system. You want that incremental innovation that 

occurs after that to make sure that you are getting optimal exposure to the patient of the drug. That is called pharmaceutical 

sciences. It has been practiced by pharmacists for centuries, 

compounding and making drugs that actually take that active ingredient and make it available to patients. That is innovation. 

Pharmaceutical sciences is a branch of science which pretty much 

literally has been written out of the Indian patent law and proscribed from patentability. And that is really something that 

should be part of the law, to encourage the kind of innovation that 

you want and makes those drugs better available to patients. 

Mr. LANCE. From my perspective you have hit right on the key, 

and I appreciate your testimony in that regard. 

India has been praised for improving access to medicines in parts 

of the developing world. It is my understanding that India raises 

more money taxing medicines than it actually spends on medicines 

for its own people. Mr. Waldron or perhaps others on the panel— 

I start with Mr. Waldron—can you describe some of the access programs that your industry has implemented to help Indian patients 

regarding innovative medicines? 

Mr. WALDRON. I think one of my fellow panelists described the 

Novartis access program. 

Mr. LANCE. Yes. 

Mr. WALDRON. I have described our access program. But most all 

of the industry has implemented an access program in one form or 

another to make these drugs available to patients. The problem in 

India is that there is no counter-facing public health system in 

which to interact with. There is no government payer. So a lot of 

this has to be done at the private level or at direct interactions 

with clinics. So it is a very difficult dynamic than what we see in 

the United States, where we have a government payer versus another situation. So most of the industry has tried to do its best in 

these circumstances, but when you are not dealing with a system 

that treats all of the patients, the access to medicines issue become 

becomes an access to health care issue, which is a completely different thing. 

Mr. LANCE. Thank you. My time has expired. Thank you very 

much. 

Mr. TERRY. The gentleman’s time has expired. The chair recognizes the gentleman from Utah. 

Mr. MATHESON. Thank you, Mr. Chairman. I appreciate the 

panel participating today. 

85 

Mr. Waldron, from listening to today’s testimony, it appears 

India is using its intellectual property law to build up their domestic industries at the expense of U.S. innovators. 

Can you elaborate on how these types of policies threaten to 

harm your specific industry if left unchallenged? 

Mr. WALDRON. What is happening in India is being looked at 

very carefully by other countries. It is a portions and pieces of what 

has been implemented in the Indian patent law has been adopted 

by Argentina, the Philippines, it is being looked at in Turkey. In 

fact, in some of the more developed countries they are actually 

looking at—more actively at anti-IP-type measures. This is very 

distressing for the point that it is the boom that has given the benefits to our economies. So we have to be very careful about counteracting anti-IP sort of contagion and spillover from India. And I 

think unless we are willing to look at the crucible of the activity 

that is happening in India and sort of draw a line and say this is 

unacceptable at some point, it is going to be seen as permissible 

by the Brazils and the South Africas and other countries to sort of 

take it upon themselves to implement measures, particularly if 

there is no downside to doing it. The biggest downside is the long 

term downside that it affects the innovative economy. It would be 

very shortsighted if we really were not to sort of take a stand at 

this point and protect the innovative environment which is protected by intellectual property. 

Mr. MATHESON. And you may not be able to answer this question, but to the extent that you see potential spillover into other 

countries to adopt these same policies, do you have a sense of how 

soon that could be presenting itself to us where we are having a 

hearing again, that Chairman Terry is going to call a hearing and 

talk about instead of India it will be another country? Where is this 

happening so quickly? 

Mr. WALDRON. I think we are seeing it in real time. As I mentioned, Argentina has adopted patentability restrictions or guidelines that affect it. The Philippines have as well. The Brazilians 

are looking very carefully at different mechanisms. So we are seeing sort of a very concerted international effort on this. And I think 

it is really time that we sort of make a stand on the value of IP. 

And that is what we should do as a country because we are 

innovators, we export innovation. And that is really so critical to 

our economy. 

Mr. MATHESON. I appreciate that. Mr. Hoffman, in your testimony you suggest that resolving issues like India’s preferential 

market access initiative through the World Trade Organization 

would not be ideal for industry entrepreneurs. Is that a fair characterization, first of all? 

Mr. HOFFMAN. It is certainly not ideal, largely because—— 

Mr. MATHESON. Can you just expand on why you don’t think that 

is the right way to go in your opinion? 

Mr. HOFFMAN. Well, it is more of a when all else fails kind of 

a recommendation. And the simple reason why is that it takes 

years to resolve. And in our industry, 2 or 3 years are three 

iPhones and 20 versions of Angry Birds. I mean innovation just 

keeps moving along. And so we hope, again this is one of those situations where when you have a mutually advantageous situation 

86 

where both countries are innovating like they are doing, listening 

to Mr. Waldron, Dr. Waldron, Counselor Waldron, I have to—hearing what he is saying in terms that we are an innovation economy, 

you want to export innovation. India has progressively moved up 

the value chain when it comes to information technology. And they 

are exporting more and more. Why would you risk that? By not 

only locking yourselves out, but the contagion effect that Mr. 

Waldron just talked about certainly applies in our case as well. So 

we hope that given, again, the mutual understanding that we both 

have about the benefits of innovation entrepreneurialism we can 

resolve this short of giving—handing this over to the trade lawyers 

in Geneva. 

Mr. MATHESON. With that, Mr. Chairman, I just suggest that 

this potential of this spreading to other countries just highlights 

the importance of this hearing even more. And with that, I will 

yield back. 

Mr. TERRY. Good point. The chair now recognizes Mr. Guthrie. 

Mr. GUTHRIE. Thank you, Mr. Chairman. I appreciate that. I appreciate everybody being here. Ms. Dempsey, reading through your 

testimony, we have all talked about the range of problems with 

India. You reference in your testimony the bilateral investment 

treaty and negotiations that are on hold now because of India’s recent actions. What would you like to see happen now that could get 

these negotiations started again? What would you like to see? 

Ms. DEMPSEY. Sure thing. We at the NAM have been strong supporters of bilateral investment treaties as ways to grow reciprocal 

investment, investment that comes into the United States that benefits manufacturing and other economic activity here, and also 

broadens our relationship with those other countries. If India were 

prepared to agree to, to negotiate the type of high level BIT provisions that were recently reviewed by this administration and put 

out in April of 2012 that include market access provisions, basic 

provisions from our own Constitution, things like takings and due 

process and nondiscrimination, including provisions I think that 

would get at many of the property rights and forced localization 

issues that we are seeing, as well as high level enforcement mechanisms, then we would see that the Indian Government is serious 

about moving forward and growing the U.S.-Indian relationship. As 

I understand it at the moment, the Indians, we started these negotiations back in 2008. The U.S. took some time to review its model 

under this administration. And now the Indians have said, well, we 

are reviewing our model, a model that was already relatively weak 

compared to the United States system. If India is not ready to negotiate this type of high level treaty, there are a lot of other countries in the world and Africa and parts of Asia that would be very 

interested in negotiating this. We have these types of treaty arrangements or through our trade agreements with about 60 other 

countries. And they really are a win-win for both sides. 

Mr. GUTHRIE. Thanks. And Mr. Hoffman said in your testimony, 

I believe, and I quote, ‘‘That India’s policies that are certain to reverse its past successes as an emerging economic power.’’ And is 

that what you are leading to? I mean is it just foreign direct investment you think they will lose, or what is the nature of that? Or 

add to that quote, I guess. 

87 

Mr. HOFFMAN. Well, we are already seeing it. We are already 

seeing a significant decline in foreign direct investment. I think 

there is a genuine concern about the direction where the country 

is going. But meanwhile, you can’t just view India in a vacuum. 

You have to understand that a lot of other countries in the region 

are following the same playbook that India used in the 1990s, and 

they are developing an educated workforce. They are actually encouraging companies that have invested in India to expand in those 

countries, and they are essentially trying to adopt the global innovation supply chain that India developed. You take a restrictionist 

approach, you are essentially turning your back on the very things 

that you helped to create, and literally handing it to your competitors in the region. 

Mr. GUTHRIE. This is open to the panel. Has India replaced 

China as the country presenting the most challenging environment 

to intellectual property? India has replaced China or are they both 

very serious? I know that came from your testimony, Mr. Elliot. 

Thanks. 

Mr. ELLIOT. I will take a stab at that. Look, due to the size and 

scope of China’s market, I.P. theft will continue to be a huge problem. We will continue to need to work with China and the Chinese 

Government for some time. That said, there are a number of examples where the Chinese Government appears to have been responsive to issues raised with them. And in some areas, they are certainly moving in the right direction. 

Two points to be made about India I think are that firstly, there 

has been a steep decline with respect to the I.P. environment there 

over the last 18 months. So they are clearly heading in the wrong 

direction. The second point I would make, in referencing back to 

the international index that was released last year, the baseline is 

already low. They are already the lowest in the world when it 

comes to their I.P. environment. So the bar is low, and they are already heading further down. And that is the concern with respect 

to India. 

Mr. GUTHRIE. Thanks. Our Founding Fathers put in the Constitution a robust patent. That is an enumerated power of Congress. Because I think what we have done in the last 226 years 

since our Constitution has been adopted has been phenomenal. And 

I think it is because we have had protection of intellectual property. And now that we are global, and you can invent it here and 

create it here and it happens and you lose it overseas, that is a 

problem with investment. And granted, there are issues with costs 

and trying to make sure that we get products to people that need 

them at the right price at the right time, which we need to focus 

on. 

But thank you, and I yield back. 

Mr. TERRY. The gentleman’s time has expired. The chair now recognizes Mr. Olson of Texas. 

Mr. OLSON. I thank the chair, and welcome to our witnesses. The 

topic of this hearing is very important to me. My district, Texas 22, 

is the most ethnically diverse district in America. And the IndoAmerican part of that diversity is the fastest growing part. If the 

Indo-American community in Texas 22 grows like it did between 

the census of 2000 and 2010, in the 2020 census they will be the 

88 

majority minority in Texas 22. They will be larger than the African 

American population, larger than the Hispanic American population, larger than the Anglo American population. They will be the 

largest. And Texas 22 is the only one in 435 congressional districts 

that has that blessing. But robust trade with India that complies 

with international standards is more important than ethnic diversity in my district of Texas. It is important for our national security. Looking at a map of the world, like I did last night, the U.S. 

is facing threats to our security from both sides of the ocean, Pacific side, the Atlantic side. If you could magically take a flight out 

of Reagan National and head due east, after you cross the Atlantic 

you would hit Morocco, then Algeria, Tunisia, Libya, Egypt, Saudi 

Arabia, Jordan, Lebanon, Syria, Iraq, Iran, Pakistan, Afghanistan, 

Bangladesh, Nepal, China, Thailand, and Myanmar. Now you are 

over the Pacific heading home. There are not a whole lot of friends 

on that route. In fact, most of those countries are dominated by 

radical Muslim governments that want to hurt America. There are 

two democracies on that flight path, Israel on the eastern Mediterranean Sea and India in the heart of Asia with a dominant position on the Indian Ocean. I have seen firsthand that dominant position because I deployed for 6 months to an island called Diego 

Garcia in 1994 in the dead center of the Indian Ocean. And while 

India is the world’s largest democracy, she is still young at 66 

years old, and going through some serious growing pains associated 

with individual freedoms and free market economies. When our 

country was 66, we were having some big problems that manifested 

themselves in a Civil War 20 years later. Our trade relationship 

with India has grown dramatically in the last 2 decades. American 

businesses need that huge market. And India needs us. And like 

all of you all, my blood boils when I hear that India is revoking 

and denying patents and granting compulsory licenses for cancer 

treatments, or adopting local content requirements, or the recent 

Chamber of Commerce study that ranked India’s IP environment 

behind China and Russia. China? China can’t spell IP if you spot 

them the I. As a nation, we stand with India like my dad did when 

I was growing up and I made his blood boil. He put his arm around 

me and showed me or pulled me where he would go to make sure 

with his fingers resting firmly on my shoulder just to inflict some 

pain if I diverted from the course we needed to go down. That is 

what we should do with the Indian Government. A real high level 

question here, and sorry for the time, but most of the discussions 

on trade policy with India occur in the executive branch. We talked 

about the Secretary of State going there, the Vice President, the 

Secretary of Energy went there recently. Is there a role for Congress? And most importantly, what can I do with my district to 

help get some grass roots? Because we have people in my district 

who have great strength, great pull. What can I do to help make 

sure we get India on the right path again? 

All the way across the board. Start with you, Ms. Dempsey. 

Ms. DEMPSEY. Thank you. I think you see the issue very clearly. 

We need to, we must have a strategic relationship with India, but 

we have got to do it as equals, and they have got to play by the 

rules. I think there is a definite role for Congress. You know, over 

250 Members of the House and Senate have written to our PresiVerDate Nov 24 2008 12:23 Feb 02, 2015 Jkt 037690 PO 00000 Frm 00094 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-62 CHRIS
89 

dent or Secretary Kerry in the last few weeks identifying these concerns, all talking about the need to get our relationship on the 

right track. You know, there are ways to grow manufacturing in 

India. We at the NAM have a lot of ideas about growing manufacturing. That is what we focus on here in the United States. India 

can take a page. I think sharing those desires, but also talking to 

the Indian Government officials, the embassy, others that come 

through and talking about this is what makes an economy strong 

and this is how our two economies can best work together. 

Mr. TERRY. Thank you. And the gentleman’s time—— 

Mr. OLSON. The question is directed to Mr. Waldron, Mr. Elliot, 

Mr. Hoffman, Mr. Smirnow, and Mr. Malpani. Thank you. Same 

question. 

Mr. TERRY. All right. When we are finished here there will be a 

statement about written questions to you. And I think we know one 

of the first questions that will be submitted to the rest of the panel 

now. 

At this time the gentleman from Mississippi is recognized. 

Mr. HARPER. Thank you, Mr. Chairman. And thank each of you 

for being here. This is certainly a very important issue. I know that 

we have talked about a number of different industries and areas 

that are of great concern with us. And of course for my State and 

my district we have things ranging from steel manufacturing to 

poultry producers. And I know that India has denied access for decades to their markets to U.S. poultry producers. I know WTO is 

looking at that now. We are hopeful that this will be resolved. And 

there is no reason that we can’t have a robust trading partner on 

a fair and level playing field with India if they so desire. And we 

hope that they will. But if I could ask you, Ms. Dempsey and Mr. 

Elliot, as we look at particularly at subsidies, I know that the Indian Government heavily subsidizes a number of its domestic industries, including its steel industry. The government provides benefits to its domestic steel producers through a number of programs, 

including a variety of export incentives and controls over raw material prices. For example, the Reserve Bank of India provides preferential short term pre-shipment export financing, or packing credits, to exporters through commercial banks. 

How can the United States Government address the market distorting effects of these subsidies and ensure that they do not have 

detrimental effects on U.S. manufacturers in the U.S. and global 

marketplaces? 

Ms. DEMPSEY. Thank you, Congressman. You have identified a 

number of serious issues. In addition to the direct subsidies that 

you are talking about there are also export tax restrictions on iron 

ore and derivatives that make the price of certain raw materials 

unfairly low in India’s market. They have I think it is the fifth 

largest steel producing country in the world right now. How does 

the U.S. Government engage? I mean on one hand U.S. businesses 

have already employed our trade remedy rules, the anti-dumping 

and countervailing duty, which does get at the subsidies. We would 

like to see Congress better ensure enforcement of those rules. And 

there is the Enforce Act that we are hoping to get included in the 

Customs reauthorization bill in another committee. But that would 

be one way. You know, the U.S. Government is in a lot of dialogue 

90 

at the OECD and in other areas on steel trade more generally, trying to eliminate subsidies. You know, over the years we have seen 

massive overproduction. It really has caused a change in our industry here. And so I think those are the types of initiatives and the 

dialogue that we all want to see to help India understand there are 

ways to grow your economy. It is very much in the United States’ 

benefit for India to grow its economy. But there are ways to do that 

that work and there are ways that are destructive to our relationship. And we think that there are good ways that the Commerce 

Department, the office of USTR, as well as other agencies can help 

with the Indian Government if they want to listen. 

Mr. HARPER. Thank you, Ms. Dempsey. Mr. Elliot, anything you 

can add to that on your opinion how we can best address what 

India is doing particularly as it applies to the steel subsidies? 

Mr. ELLIOTT. Thank you, Congressman. I am afraid that trade 

subsidies is not my strength or area of expertise, but I am more 

than happy to get an answer back to you with respect to the U.S. 

Chamber’s position on this. But I couldn’t imagine it is a terribly 

different position than that of the NAM. But I will certainly provide it to you. 

Mr. HARPER. Thank you very much. And I know we are on limited time. But I want to say also in talking about the WTO, I know 

that India is currently pursuing a dispute settlement case against 

the United States at WTO challenging the U.S. application of countervailing duties to imports of Indian hot rolled steel. India’s challenge is in part due to the U.S. Department of Commerce’s findings 

that subsidized iron ore was supplied to Indian steel producers by 

a state-owned company. This case dates all the way back to the 

year 2000, I believe, and challenges not just the specific CVD cases 

on hot rolled steel, but also the U.S. trade laws and regulations on 

which the case was based. 

Are we doing everything possible to protect our trade remedy 

system, which operates according to WTO principles from such unwanted attacks? And what additional steps can the United States 

Government take to strengthen our trade remedy laws? I know we 

are almost out of time, but Ms. Dempsey, take a stab at that. 

Ms. DEMPSEY. Thank you. On the issue of the case, I think that 

the office of USTR, the Department of Commerce that helps USTR 

with these cases is very strong, and clearly defends U.S. trade remedy laws in this case. And I do think that they are doing all that 

they can in that context. We could improve, as I said, the enforcement of our trade remedy laws. We have too many cases where 

companies bring cases, and then they win them, they spend a lot 

of money, many of them small and medium-sized companies, and 

then there is transshipment around that and there is no way, it 

takes the Customs department years to even determine whether 

there is a problem. 

Mr. HARPER. Thank you. My time has expired, and I yield back. 

Mr. TERRY. The gentleman from Ohio is recognized for 5 minutes. 

Mr. JOHNSON. Thank you, Mr. Chairman. And I appreciate the 

panel members being here. This is indeed an important hearing for 

my district. Manufacturing is a big issue in eastern and southVerDate Nov 24 2008 12:23 Feb 02, 2015 Jkt 037690 PO 00000 Frm 00096 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-62 CHRIS
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eastern Ohio, particularly the steel industry. Lots of concerns about 

some of the things that we have talked about today. 

According to the Organization for Economic Cooperation and Development, state-owned enterprises, or SOEs, in India count for 20 

percent of the value of the stock market and are pervasive in mining and energy, steel, logistics, and other sectors critical to manufacturing and raw materials. For example, the Indian Government 

owns at least 80 percent of the steel authority of India, a company 

called SAIL, the country’s largest steel producer. What steps can 

we take to ensure that Indian state-owned enterprises act in accordance with commercial principles and compete fairly with privately-owned companies worldwide? 

Ms. DEMPSEY. That one is coming back to me. You raise a very 

important point. In negotiations the United States has right now 

with the Trans-Pacific Partnership, the issue of ensuring that 

state-owned enterprises act in commercial considerations is a very 

important offensive request of industry and the U.S. Government. 

India is far from participating in that type of high level discussion 

or negotiation. What I think, there is a few areas where I think we 

can do more. Some of it comes back to I think all the basic issues 

and the industrial policies that my business colleagues and I have 

identified here. Helping the Indian Government understand that a 

market-driven economy, an economy that is based on respect for 

private property, including intellectual property, and where fair 

competition isn’t a bad thing, but is a good thing, those type of 

competition principles, that type of market opening is going to help 

India move towards a better result. I know there are discussions 

in the OECD, of which India is not a part, on these issues of stateowned enterprises. I don’t think we have got a solution yet for how 

to deal with the SOE issue in these emerging markets. But we are 

happy to work with you on that. 

Mr. JOHNSON. I certainly hope we continue to work on it, because 

it is problematic. 

Also, India imposes export restraints on a number of essential 

manufacturing raw materials, including a 20 percent duty on steel 

scrap exports and a 30 percent duty on iron ore exports. Such export restraints artificially decrease prices for Indian manufacturers, while limiting supply and increasing prices for U.S. manufacturers. What measures should we take to encourage India to remove these market-distorting trade barriers? 

Ms. DEMPSEY. This is a tough issue. You know, the U.S. Constitution, our forefathers long understood this issue more clearly. 

We ban, for instance in the United States we can’t impose export 

taxes constitutionally. It doesn’t make sense. Unfortunately, the 

World Trade Organization rules, while they prohibit quantitative 

restraints on exports, they don’t yet prohibit the taxation of exports 

like we are seeing in India, which has exactly the type of anti-competitive effects that you have cited. We would like to be able to get 

back to the World Trade Organization. We would like to have global talks about this. In the meantime, I think we need to help the 

Indian Government help their industry understand that this is a 

short-term problem that is going to have long-term effects on the 

global competitiveness of its industry. 

92 

Mr. JOHNSON. OK. One final question while I have still got a 

minute left. India also imposes barriers to imports into its domestic 

markets. For example, in September 2012 India’s Ministry of Steel 

began requiring the application of mandatory standard certifications for a number of steel products. Because of these new requirements, all exporters of steel products to India must register 

with the Indian bureau and pay a 1 percent tariff for inspections. 

What steps should we be prepared to take to ensure that those 

barriers, the import barriers do not negatively impact U.S. exporters to India? Is that in the same category with all the rest of these? 

Ms. DEMPSEY. That is exactly in the same category. We have 

heard those concerns in our membership, but we have also heard 

concerns of customs in India in a whole host of other industries. 

This has to be part of the solution because part of what India is 

doing is making it harder for us to get our imports in through a 

variety of different areas. 

Mr. JOHNSON. Well, having worked in the private sector before 

coming here to represent the people that I do, the company that 

I worked for had relationships with India, and certainly viewed 

India as an emerging market. Hopefully, through our negotiations 

with India we can help them understand that if they want American companies to consider India an emerging market they better 

start playing fairly in the game. 

Ms. DEMPSEY. Exactly right. 

Mr. JOHNSON. Thank you all. I yield back, Mr. Chairman. 

Mr. TERRY. Thank you. And that concludes the questions. I remind members that they have 10 days in which to submit written 

questions to our panel. And to our panel, if you do receive written 

questions, we would appreciate, we would really like a timely response. And that would be a couple weeks, not several months or 

years. 

And I want to thank all of you. Your testimony was great. The 

answers to questions gave us lots of things to think about in regard 

to the issue with trade, patents with India. So thank you for your 

time. 

This concludes our hearing, and we are adjourned. 

[Whereupon, at 11:50 a.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

PREPARED STATEMENT OF HON. FRED UPTON

This is a timely hearing on a topic of great importance to both U.S. companies 

and the public at large. We have a strong and growing trade relationship with 

India, as well as an important strategic alliance on the world stage. A key U.S. advantage in our trade with India is our strength in innovation and the resulting intellectual property—from high-tech, to green-tech, to medical technology. India is an 

important investment partner for a number of U.S. companies in these fields, but 

unfortunately, these companies like Pfizer in southwest Michigan are facing a serious threat to their intellectual property, thus jeopardizing the trade relationship we 

have with India in those industries. 

India has not been a battleground in the effort to protect intellectual property in 

recent years, but with recent developments, that soon may change. While the use 

of compulsory licenses is permitted under international trade agreements, their use 

should be reserved for serious situations such as an epidemic, making critically 

needed drugs available en masse in relatively short periods of time. India issued its 

first compulsory license last year and is considering issuing three more under the 

guise of making expensive cancer drugs available for the ‘‘urgent needs of public 

health’’ and for failure to manufacture the pharmaceuticals in India. 

93 

Both reasons suffer fatal flaws: the domestic manufacturing requirement is a 

clear violation of India’s WTO national treatment obligations, and Indian companies 

are selling their generic versions at a cost that remains out of reach for most of India’s population. Instead, only a few privileged citizens can afford these generic 

versions of patent-protected, U.S.-researched and developed pharmaceuticals, delivering all of the profit but none of the R&D pain to India’s generic pharmaceutical 

manufacturers. I say ‘‘pain’’ because it is an expensive, lengthy, and arduous process 

to develop a drug and see it through the FDA’s rigorous approval process. The cost 

of developing most drugs exceeds $1 billion today and with the reality that only 1- 

in-10,000 compounds are ever approved by the FDA, the odds are not favorable. 

Without the short-lived monopoly promised by a patent, there is little chance for private companies to recoup their investment, which means there is little incentive to 

engage in life-saving research. 

The danger in India’s recent practices isn’t limited to pharmaceuticals. India now 

faces a WTO dispute in the green-tech field regarding mandatory domestic content 

requirements for solar cells and solar modules. U.S. companies in the high-tech industry see what happened to the solar industry and what’s happening in the pharmaceutical industry and rationally fear it could happen to them. IP-intensive industries contribute over $5 trillion to our economy and support a total of 40 million 

American jobs. These incursions on their intellectual property rights hurt their bottom line and thus their ability to contribute to our economy and job market—something we cannot take for granted, especially in this fragile economic time. 

I’m deeply disturbed by the turn of events in India’s intellectual property system. 

I am interested in what our witnesses have to say about the impact of these practices on U.S. companies, their employees, their R&D efforts, and the outlook for our 

trade relationship with this strategic ally. I yield back. 

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