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TRANSCRIPT: Background Call with Assistant USTR Stan McCoy Regarding the 2010 Special 301 Report

WASHINGTON, D.C. – On April 30, Assistant USTR for Intellectual Property and Innovation Stan McCoy took questions from reporters regarding the 2010 Special 301 Report during a background call.  

(Stan McCoy):   All right.  If you could all just please put your phones on [mute], for the moment I will – I will talk for a few minutes here and then we will throw it open for questions, my name is Stan McCoy.  I am the Assistant US Trade Representative for Intellectual Property and Innovation at the office of the US Trade Representative.  Today we are talking about the annual Special 301 review and the results are being announced, Special 301 review is a process mandated by congress that, USTR to encourage particular trading partners to place a higher priory on addressing identified IPR problems, okay for all please do put your phones on mute thank you very much, each April USTR issues a Special 301 report cataloging did the guy PR problems in dozens of countries worldwide our trading partner and banking and report sends a message to the world including potential investors about its commitment to IPR protection Special 301 also affords an opportunity to give credit or new as if our decisions to improve training partners standing when they are significant improvements in IPR protection and in court.  

                This year we had reviewed 77 trading partners for the Special 301 report and there are 40 countries listed in the various categories shown on page three of the report.  These designations of the result of close consultations with effected stakeholder interested parties foreign governments with the US congress and interagency discussions inside the US government.  I want to say before getting to the results that in terms of our process this year we enhanced public engagement activities and that yielded a – a larger number of comments this year than in recent past years to with 571 comments from interested parties that was a significant increase the submissions that we received were made available to the public you can find them online at docket number USTR_2010_003.  In addition on march 3rd 2010 we conducted a public hearing that permitted interested persons to testify before the inter agency Special 301 subcommittee about issues relevant to the review the hearing included testimony from 23 witness from governments to industry to non governments there is a transcript of that hearing available on the USTR website.  

                The consultations on the whole were very helpful and ensuring that Special 301 decisions that we are announcing this year are based on a robust understanding of complicated issues involving intellectual property and reflect sound well balanced assessments of developments and particular trading partners.  As discussed in the report USTR will continue to interact closely with the governments, the countries that are listed.  Let me now turn to the results in this year's review.  There are three significant developments that I want to note for you – countries that are being removed from the Special 301 watch list for those of you who are not familiar every year we include a priority watch list and a watch list in the report these are the main categories in which countries are categorized in the report.  Removal from the watch list is a significant step.  It signals an improvement in IPR protections and enforcement.  

                The three countries that we are removing this year are the Czech Republic, Hungary and Poland.  Let me speak to the Czech Republic first.  The Czech Republic is being removed from the Special 301 watch list because of significant progress made over the past two years to more effectively control its border markets.  Moreover a new criminal code raising penalties for IPR related crimes entered into effect on January 1st 2010.  We will be continuing to monitor the situation and the effectiveness under of enforcement under this new law.  Turning to Hungary, Hungary is being removed from the special 301-watch list in recognition of significant improvements on enforcement and other actions taken during the past year.  Hungry has taken proactive steps to address the growing thread of Internet piracy and its customs and police officials have developed their ability to identify infringing products effectively through consistent enforcement actions Hungary has closed a notorious street market that was home to a wide array of illegitimate products.  The effectiveness of Hungary's measures to protect IPR including various public awareness campaigns and educational activities is something that we welcomed.  We will continue to monitor the situation in Hungary and turning finally to Poland - Poland is being removed from Special 301 watch list in recognition of a significant reduction in the availability of pirated and counter fit goods, particularly at border markets that had been the subject of concern and pass Special 301 reports, and it also recognized increased and improved enforcement efforts and the strong cooperation that exist between the rights and enforcement officials.  The government has also taken some initial steps to address Internet piracy concerns and we will be continuing to monitor the situation in Holland as well.  Turning to other features of the report, we are continuing to list China on the priority watch list in the report reflecting the prominence of the IPR concerns there, counterfeiting and piracy is clearly a major continuing concern in China we also note in the press release this - this been posted on the USTR Web site, serious concerns about Chinese implementation of its indigenous innovation policy that may unfairly disadvantage US IPR holders.  Indigenous innovation policies could - from American technology and - and products so we will find a code in the press release from the Ambassador (Kirk) speaking to that particular issue.  

                I also want to announce in terms of results that USTR will conduct out of cycle reviews for the Philippines and Thailand to monitor progress on specific issues.  An out of cycle review is an the extra opportunity for us to take a look at IP protection and enforcement by our trading partners.  So you can consider today's call, today's report - today's report to be the in cycle review, this is what formally do, issue a report at the end of April every year.  Sometimes we want to take or have the extra engagement in those cases we often announce an out of cycle review that's what we were doing in this year with the Philippines and with Thailand.  We had successful out of cycle of reviews that concluded recently with - with both Israel, and Saudi Arabia and we are hoping to provide similar opportunities with our trading partners the Philippines and Thailand to engage with them and see if we can make progress on some of the issue that concern markets.  So I would be happy to - to speak to those further if you have questions.  Let me just by way of further elaborating on the results say that the - the full list of the trading partners appearing in the report are provided in the - in the executive summary of the report.  You will find them on page three of the report that I believe have been posted on the USTR Web site.  The priority watch list remains the same as it was last lead by China and Russia and then with nine other trading partners listed as well.  And then we have 29 trading partners on the lower level watch list from (Bella Ruse) through Vietnam.  I will take any questions that you would like to ask about any of those specific trading partners or about how we conducted the review at this time.  

(Lin Due):            Yeah this is Lin Due can I ask - ask question?  

(Stan McCoy):   Yes please.  

(Lin Due):            Yes.  Above this indigenous, you know, innovation policy you just mentioned in China, can you be more specific about why UST is concerned?  

(Stan McCoy):   Yes, this is - this indigenous innovation policy is a top trade policy priority for the United States, we find it - we find it troubling that these indigenous innovation policy is due to unfairly disadvantage US right holders, we have been reaching but the stakeholders working with the Congress as well as staying in close touch with key trading partners to share our concerns on these issues.  We are pressing the Chinese Government hard to address this matter.  USTR is working closely with other US government agencies, and we have raised the issue with officials from all the relevant Chinese Government agencies at all levels including bilateral meetings between Ambassador (Marantis) held in Beijing this month.  Ambassador (Kirk) also raised our concerns about these policies with the Chinese Vice-Minister of commerce when she visited Washington in February, and we will continue to raise the matter - matter at every appropriate opportunity.  

(Sam Gilston):   Stan, this is Sam Gilston - couple of weeks ago the Chinese issued new regulations on indigenous innovation and the business community issued some statements saying that these where favorable and I think USTR say they reviewing those changes or what you - are saying now saying that you reviewed the regulation that where published two weeks ago and you continued to have these concerns that those regulations did not satisfy your objections?  

(Stan McCoy):   Thanks for the question Sam, we appreciate the issuance of comments on some changes in one particular regulation because this is a very important issue and we appreciate the China seeking public comments on the right way to promote innovation.  We will be making comments and we will be looking at this measure in its larger context because we are concerned and remain concerned that the premise of this measure the Government picking winners and losers is actually going to impede innovation.  We are pressing for comprehensive dialogue with China on appropriate non-discriminatory ways to foster innovation not to condition it, not to push it into China but to let it actually work both for China and for China's trading partners.  

(Sam Gilston):   (Unintelligible) for that one easily.  

(Stan McCoy):   Thank you.  

(Adam):               This is Adam (unintelligible).  I have a question about to what extend are - are any of these indigenous innovation problems going to be addressed at the WTO level, I am glad to know has that been a part of this one?  

(Stan McCoy):   I'm not in the position to speak to that other than to say that we’ll – we’ll look at all appropriate avenues to engage with the Chinese on this set of issues.  

(Doug Palmer): Hi this is Doug Palmer with Reuters, and I want to say Russia is once again on the - on the priority watch list, you know, I - I earlier this week there - there where meetings between the US and - and Russia on its WTO that and both sides agreed to intense - to intensify those efforts this in terms of - of this WTO session how - how big optical are the IPR concerns to Russia completing if that I think I accept kind of asset an awkward way where basically this - this Russia still have a lot to do on the IPR front before it's - it's going to join the WTO?  

(Stan McCoy):   Doug, definitely additional work remains for Russia for fully implements its commitments under the IPR bilateral agreement that we reach them in 2006, we are looking to Russia to make further progress in implementing that agreement specifically ensuring that the Russian customs code, the civil code, are amended that amendments to those pieces of legislations have been introduced into DMO we understand but not enacted the law and medicines also it needs - needs to be amended to implement the IP bilateral agreement and implement also the relevant TRIPS agreement obligations, that Russia would undertake upon accession to the WTO, and yes implementation of this bilateral agreement is important in our consideration of the way forward on Russia's WTO accession.  

(Doug Palmer): Right.  Did you get any sort of timeframe from them on - on when they would be able to implement all those - all those things you talked about?  

(Stan McCoy):   No.  

(Doug Palmer): No okay.  

(Marti Lela):       Hi Stan this is Marti Lela from Chile, and I would like to ask about the (unintelligible) trade agreements to sake commitments that Chile is still not complying the regarding Intellectual Properties the main reason why we are still in the priority watch list so what - what kind of timeframe do you have specifically for Chile for this year?  

(Stan):  We don't have a specific timeframe that we are announcing at this time for engaging Chile, we are very opened to engaging with all of the trading partners who are listed in this report.  So we've - we tried to make that very clear in he executive summary of the reports that we are extending an opportunity to our trading partners to engage with us, you will see that reflected on page two of the report.  

                In the case of our FTA partners, you know, generally speaking many of them have made important progress in enhancing their level of protection for IPR.  You have countries like Morocco, Bahrain, Oman that have put in place cutting edge laws and the copywriter field for example, in order to implement FTA countries like Singapore that have, FTA has contributed to a strong IP and - IP protection and enforcement environment.  It’s true in Chile we are - we are looking to engage with Chile, there is a new government there, that understandably is very focused on earthquake reconstruction at the moment.  But we are open to working with and engaging with the Chilean Government to address the problems that are reflected in this report.  

(Woman):           Thanks.  

(Adam):               This is (Adam) from (unintelligible).  I had another question about Russia, is the - this bilateral agreement, is this the only thing standing, I guess kind of in the way as far as what Russia needs to address before they can successfully join the WTO.  What - what if anything else is an issue with Russia?  

(Man):  Adam, the sort of full range of things that Russia needs to do is a little bit beyond my reach so I’m going to decline to - to the whole situation of Russia's WTO accession in the larger picture.  I can't say again that implementation of the November 2006 bilateral agreement on intellectual property rights is something that patient gives as important in the context of the Russia's WTO excision.  

(Doug Palmer): Stan this is Doug again with Reuters, and I apologize, because I’m sort of writing a story and listening at the same time, so you may have already address this point, but you did talk about your enhanced public engagement activities.  I just - I just wonder as a result of that - did that - did that bring up any issues that may have been neglected before or released and highlighted as much it using the process lead to any different conclusions this time than previous reviews?  

(Stan McCoy):   Thanks Doug, we feel like the public engagement and the broader outreach that we conducted this year had a very positive impact.  In this year’s 301 process we took the additional steps that I descried earlier to reach out to a wider and more diverse group of stakeholders.  We held the 301 hearing, where numerous groups, three governments, nongovernmental organizations came forward to testify the input that they gave us, we thought it really gave us an opportunity to more study certain issues that they highlighted in their testimony.  One example might be the health related IP issues in Thailand, and that analysis help to inform our Special 301 decisions.  

(Doug): Okay.  And could you just talk briefly about Canada, I think they were put on the priority watch list for the first time last year, and why that - what haven't they done that they - that they need to do and, did that keep them on the list again this year?  

(Stan McCoy):   Yeah, you are correct.  Ambassador (Kirk) placed Canada on the priority watch list last year.  Even though Canada is a world leader in its rate of Internet usage and online file sharing, Canada's IPR regime has not kept pace with changing technology.  The US government had been urging Canada and continues to urge Canada to enact important - or reforms that will include implementation of commitments made when Canada sign the WIPO Internet treaties in 1997.  We also are encouraging Canada to provide its customs authorities with the authority to see pirated and counter fit products.  

(Doug): Okay.  

(Man):  Yes, are you going to raise this IPR issue in the forthcoming strategic and economic dialogue with China?  

(Man):  Yes, I’m confident that the need for intellectual property protection will be part of our high level discussions.  

(Man):  Does USTR have a formal role in the strategic and economic dialogue?  

(Man):  Oh I’m - I’m going to - I know that the strategic and economic dialogue includes cabinet level patient from across the administration.  I’m not the expert on China, so I’m going to differ to my colleague (Clare Reid) who is the assistant USTR for - for China and maybe if you want to seek an answer from her on that I will be happy with that.  

(Man):  Okay, all right.  

(Adam):                               This is Adam.  I had a question about Thailand it’s now on the out of cycle review.  Did that public input and public common process have anything to do with Thailand being put on that review?  

(Stan McCoy):   Well it did in the sense that we got a number of different recommendations and perspectives on Thailand ranging from saying that they should be in the sort of worse possible category have saying that they should be removed from the list entirely to highlighting certain issues that different stakeholders thought should or should not be considered in the context Thailand.  So we had sort of a full venue of - of consideration in terms of how to approach Thailand.  What we ultimately decided to do in this year’s review to maintain Thailand on the priority watch list but provide the opportunity of this out of cycle review, that opportunity really reflects that we are encouraged by the Thai governments senior level commitments to stronger IP protection and enforcement.  The government took a number of positive steps in 2009 and it created a national taskforce to strengthen IPR, it adopted in action plan to improve the IPR regime, it proposed a number of possible pieces of IPR legislation, that could be helpful, all this is very promising.  We have not yet seem those steps be translated into concrete results.  The OCR provides us an opportunity to look for that.  

(Woman):           And then - hi this is (unintelligible).  I was wondering if you could comment on the fact that many of the countries that - either in the watch list or the priority watch list, have put that agreement with that - with America, and the problem there it seems that they are taking too long to apply every single capture specifically when it comes to IP protection and enforcement.  So, if this timeframe of - specifically Chile's case, being already five years and it’s still an issue for us, so could you comment on the fact that counties take too long to adopt whatever changes are needed to be made?  

(Stan McCoy):   Yeah, you know, our - as I said earlier our FTA partnership generally made a lot of important progress, and - and Chile has made important progress as well, and you will see some of that reflected in the report that we are issuing today.  I mean what we have to say about Chile in the report is by no means uniformly negative, but you are correct, that there are areas where we still want to engage with Chile to ensure the full implementation of the commitments that Chile made and it’s free trade agreement with the United States, and we are very much hoping that we will have an opportunity to do that with the new government in San Diego.  So that - that opportunity is out there, we - we look forward to seizing it.  In terms of your question on FTA's in general, I think I am very satisfied with the results in general that we received through our FTAs that doesn’t never - that doesn’t mean we never have compliance issues, sometimes we do, and we work with our trading partners to try and result those, just as we are prepared to work with Chile to just try and resolve them.  If - if as in many cases some time is needed for countries to translate legal changes and to improvements in their day-to-day IP enforcement performance on the ground.  We will continue to reflect outstanding concerns in this Special 301 report but overwhelmingly the experience with the FTAs on IPR is a positive one.  

(Woman):           Okay, thank you.  

(Liza Casabona):               Hi, this is Liza Casabona with (unintelligible) last year, Ambassador Kirk said that he was particularly concerned by the reports that Chinese officials were urging more lenient enforcement of IPR laws, has that change this year at all?  

(Man):  I wouldn’t say that that concern has changed, what I would suggest to you is that this year we highlight in a - in a different respect, China's response to economic circumstances.  So last year we were reflecting the concern that in the global economic, in the difficult global economic climate we had heard some reports of China, some Chinese authorities in some areas - being instructed to go easier on IPR enforcement.  This year we are reflecting a - a somewhat different macro concern in China regarding indigenous innovation which involve China on one hand very legitimate desire to become more innovative, but coupled with that the concern that China maybe pursuing that goal in ways that are harmful to the interest of US exporters.  

(Ben Bracken):  This is (Ben Bracken) from BNA.  In the removal you mentioned the border markets, could you describe how those work, and I missed what you had said about pulling with regard to the rights holders.  

(Stan McCoy):   Yeah, the border market situation was - was common to both the Czech Republic and to - and to Poland.  And - what was - what was going on here was really that you tended to have - you tended to have tourists coming over from say, Germany and Austria bordering countries to shop at these border markets, they could get various cheap goods, you know, all well and good except in the sense that these border markets were home to a lot of pirated and counter fit goods and we had expressed concern in previous Special 301 reports that the enforcement was quite weak at those border markets.  And what we are reflecting this year both in the case of the Czech Republic and in the case of Poland is that authorities in both of those countries appeared to a have stepped up their effects to address counter fitting and piracy in those border markets and we wanted to recognize that step.  In the case of - in the case of Poland and - and right holders I think I alluded to our reports of strong cooperation between rights holders and enforcement thresholds in Poland which is one of the elements that helps to provide.  Are there other questions at this point?  

(Nadia Charles):  Hello.  

(Nefeterius McPherson):             Well this is going to be the last question.  

(Nadia Charles):  Yeah this is Nadia Charles from Liberty Times Taiwan that Taiwan has been removed from the watch list for a second consecutive year.  I wonder that do you have any other concern about the IPR issues in Taiwan, or basically USTR is happy with all the progress Taiwan has been made.  

(Stan McCoy):   Well, I won’t say, I mean, you know, this is a good - this is a good question to end on, because that the fact that the country doesn’t appear in the Special 301 report doesn’t mean that we don’t have IPR issues with that country or that we don’t chose to engage with them.  The Special 301 report - here to fulfill a mandate from - from Congress to access the adequate effectiveness of IP protection and enforcement and with Taiwan we have - we have as you pointed out again shows that not to list them in the report after the successful out of cycle review in their removal from the last year.  The - the situation in - the situation in Taiwan as with many of our trading partners is that we will still have IP concerns that come up from time to time and we will engage constructively with our trading partners to try and resolve those concerns when they come up.  I’m not prepared at the moment to speak to what those specific continuing issues would be at - would be with Taiwan at this time.  

(Nadia Charles): Okay, thank you.  

(Nefeterius McPherson):             Thanks everyone if you happen to have additional questions or you want to follow up on something you can email me directly.  This is Nefeterius,  All right you all have a great day.  

(Woman): Thanks.  

(Man):  Thank you.