Last year, the World Trade Organization approved the IP cross retaliation measures provisions and Brazil happens to be the first country out to use these measures against the US. Brazil has released a list of preliminary suspensions that may be put on various areas of US goods, which happen to be from drugs, software, music and movies; as retaliation against US cotton subsidies. It will also collect another $238 million from the services sector and IP rights that US companies hold. Earlier, Brazil did break the patent in 2007 when it issued a compulsory licence agreement on rights for Efavirenz, which is used to treat HIV/AIDS.

What is interesting to surmise is how the cross retaliation will work. The measures announced by Brazil indicate the plain fact that pharmaceuticals, biotechnology and chemicals apart from Hollywood films, American software, music and books will lose their IP protection. A range of options might be used against American IP owners - from reducing the term of IP protection to licensing technology without the authorisation of the right-holder (with or without remuneration); suspending a patent holder's exclusive right of importation; and assessing taxes on royalty payments.

The United States awards subsidies to its cotton industry, including export subsidies. According to Brazil, such subsidies distort competition and violate World Trade Organization (WTO) rules.Hence Brazil filed a complaint with the WTO Dispute Settlement Body (DSB) challenging the cotton subsidies. In 2005, WTO’s Appellate Body ruled that the US policies in fact violated WTO rules and that the US should remove the adverse effects of certain benefits or withdraw such subsidies within six months. Accordingly, such measures taken by Brazil not only have a punishing character for the breach of mutually agreed WTO rules, but are also compensatory for the illegal damages caused by the US in violation of WTO rules.

Section 22 of DSB deals with compensation and suspension of concession. It states that if a country which lost the dispute does not implement the decision of DSB within the reasonable timeframe allotted, then the winning country may resort to seeking authorization of DSB to suspend certain duties of WTO system against the country. The decision on what kind of obligation has to be suspended has to be decided by the complainant. Article 22.3 gives an insight into how exactly the complainant must suspend its rights, i.e. the complainant must suspend the rights in the same commercial sector, which includes the dispute. If it is ineffective, then the country wishing to retaliate must seek DSB’s authorization for releasing its concession in other commercial field covered under the same agreement. And if this is also considered as ineffective, then the country may request DSB to suspend concession under some other agreement. This process is known as cross retaliation. DBS may reject a request to suspend concession but this can be applied only by consensus.

This process is not new but bears relevance in the recent times in the US upland Case, where Brazil formally asked the WTO Members for the right to impose sanctions on the US for failing to comply with WTO ruling against its cotton subsidy programme. It is a curious case wherein the US caused harm to Brazil interests through price suppression in world market. After eight years of litigation and leap on the part of US to follow up the decision passed by the DSB, it has given Brazil the authorization to suspend its obligations on US goods including IP rights. Though the Cross retaliation strategy has drawbacks; it is still very promising in placing poor countries in a better position by severe compliance by the richer and developed counties. Cross retaliation has no disregard for IP, but for is more of a boon than bane.