Report Highlights Shortfalls in Intellectual Property Protection, Acknowledges Progress by Some U.S. Trading Partners

WASHINGTON DC– The Office of the U.S. Trade Representative today released its annual “Special 301” report on the adequacy and effectiveness of intellectual property rights (IPR) protection by U.S. trading partners. 

“Innovation is the lifeblood of a dynamic economy here in the United States, and around the world.  We must defend ideas, inventions and creativity from rip off artists and thieves,” said U.S. Trade Representative Susan C. Schwab.  “This report underscores the Administration’s scrutiny in pinpointing challenges in protecting IPR and signals to our trading partners that effective IPR protection will remain a critical focus in U.S. policy.”

As the scale of production and trade in pirated and counterfeit goods continues to expand globally, Special 301 constitutes a critical policy tool for pinpointing problems, and provides a basis for constructive engagement with U.S. trading partners in order to address these challenges.

This “Special 301” report makes clear that many U.S. trading partners increasingly appreciate the link between innovation-fueled economic vitality and effective government enforcement against those who produce and trade in pirated and counterfeit goods.  This report makes equally clear, though, that U.S. right holders continue to face major challenges to protecting their intellectual property in many parts of the world. 

Chinese and Russian Concerns Highlighted

Again this year, USTR’s Special 301 report highlights the prominence of concerns with respect to China and Russia, in spite of some evidence of improvement.  The report also provides an opportunity to acknowledge those trading partners whose efforts to improve intellectual property protection are producing positive results both for U.S. right holders and for home-grown innovators in those countries.

Russia, Three Other Trading Partners, Subject to “Out-of-Cycle” Reviews

Russia remains a focus of U.S. trade policy in the area of intellectual property.  Large-scale production and distribution of IP-infringing optical media and minimally-restrained Internet piracy are among the major problems that require more enforcement action.  The coming months will be a critical period, as Russia moves to implement a variety of legal and law enforcement improvements to which it committed as part of a bilateral agreement with the United States on Russia’s eventual accession to the World Trade Organization (WTO).  Implementation of these commitments will be essential to completing the final multilateral negotiations on the overall accession package.

Russia made ambitious commitments to improve its IPR protection and enforcement.  As part of the Special 301 report, USTR is also announcing an out-of-cycle review to evaluate Russia’s progress. 

“I know that our Russian colleagues see the value of intellectual property to Russia’s economy and are working hard to deliver on their commitments,” said Schwab.  “I urge them to make the most of the coming weeks and months.”

In addition to the out-of-cycle review for Russia, USTR announces that similar reviews will be carried out with respect to Brazil, the Czech Republic and Pakistan. 

Out-of-cycle reviews are conducted on countries that warrant further review before the next Special 301 Report and could result in changes in their status before next April’s report. 

China

In conjunction with the release of the report, USTR announced the results of an unprecedented year-long review of strengths and weaknesses in IPR protection and enforcement in key Chinese provinces.  “Leadership at the provincial and local levels is critical to improving China’s IPR climate,” Schwab said.  “By highlighting local problems and also giving credit where it is due, we encourage local leadership.” 

While the U.S. continues to work with China in many fora to strengthen that country’s IPR regime, high levels of copyright piracy and trademark counterfeiting remain of concern.  The U.S. recently sought consultations under the WTO to address a number of discrete deficiencies in China’s IPR regime.  The U.S. has since been joined by Canada, EU, Japan, and Mexico as third parties in these consultations.

“Our recent decision to pursue IPR-related concerns in China through consultations under WTO dispute settlement rules demonstrates our determination to defend vigorously American innovation,” commented Schwab on the Special 301 report’s focus on China. “The Special 301 report flags many other issues on which we hope to remain constructively engaged with China, building on the recognition of many Chinese officials that their country has its own huge stake in effective IPR protection.” 

Improvements Noted for Several Trading Partners

In addition to flagging prominent intellectual property concerns of U.S. trade policy, the Special 301 report also provides an opportunity to recognize progress.  Brazil is being moved to the Watch List (from Priority Watch List), reflecting significant improvements in copyright enforcement.  USTR will conduct an out-of-cycle review to evaluate the sustainability of the progress Brazil has achieved with respect to IPR enforcement, and to encourage progress on certain outstanding IPR concerns.  Five other trading partners – Bahamas, Bulgaria, Croatia, the EU, and Latvia – are being removed from the Special 301 listing altogether.

Background

This year’s Special 301 report places 43 countries on the Priority Watch List (PWL), Watch List (WL) or the Section 306 monitoring list.

Countries on the Priority Watch List do not provide an adequate level of IPR protection or enforcement, or market access for persons relying on intellectual property protection.  In addition to China and Russia, 10 countries are on the PWL in this year’s report:  Argentina, Chile, Egypt, India, Israel, Lebanon, Thailand, Turkey, Ukraine, and Venezuela.  In announcing the elevation of Thailand to the Priority Watch List, the report cites a range of intellectual property concerns, including deteriorating protection for patents and copyrights.  Priority Watch List countries will be the subject of particularly intense engagement through bilateral discussion during the coming year.

Thirty trading partners are on the lower level Watch List, meriting bilateral attention to address the underlying IPR problems.  The Watch List countries are:  Belarus, Belize, Bolivia, Brazil, Canada, Colombia, Costa Rica, Dominican Republic, Ecuador, Guatemala, Hungary, Indonesia, Italy, Jamaica, Korea, Kuwait, Lithuania, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Romania, Saudi Arabia, Taiwan, Tajikistan, Turkmenistan, Uzbekistan, and Vietnam.

Paraguay will continue to be subject to Section 306 monitoring under a bilateral Memorandum of Understanding that establishes objectives and actions for addressing IPR concerns in that country. 

The implementation of Free Trade Agreements negotiated with the United States constitutes an important element in IPR improvements.  FTA partner countries, including those in Central America and the Dominican Republic, have undertaken important improvements in IPR legal frameworks in keeping with the obligations reflected in the FTAs.  Our most recent FTAs also reflect these high standards and we welcome the commitments made to improve intellectual property protection and enforcement by future FTA trading partners, including Colombia, Korea, Panama and Peru. 

Despite some encouraging developments, the detailed country discussions in the Special 301 report make clear that numerous IPR problems persist around the world.  Trade in counterfeit pharmaceuticals is a particularly grave concern, in light of the risks to human health and safety.  Unabated piracy of CDs, DVDs and CD-ROMS, and the widespread counterfeiting of trademark-protected consumer and industrial goods will also remain important focuses of U.S. IPR trade policy efforts in the coming year.