SECTION 306
CHINA
The United States and China
concluded bilateral agreements in 1992 and 1995 that were the basis for
resolving two investigations under Section 301. The U.S. Government has been
monitoring China's implementation of these agreements since they were concluded.
In addition, China became a member of the World Trade Organization (WTO) in
December 2001 and agreed that it would fully implement its WTO TRIPS obligations
from the date it became a WTO member.
China has made progress in
some aspects of intellectual property rights protection since our agreements in
1992 and 1995. In connection with its accession to the WTO, China strengthened
its legal framework considerably, amending its patent law in 2000 and its
trademark and copyright laws in 2001, as well as issuing judicial
interpretations and other administrative regulations to make them more compliant
with the TRIPS Agreement and international standards. While some implementing
regulations for these laws have been issued, China needs to issue all necessary
regulations. The United States has continuing concerns about the consistency of
some provisions of the copyright law and current regulations with international
standards. For instance, while we welcome China's efforts to address some of the
issues in the WIPO Copyright Treaty and the WIPO Performances and Phonograms
Treaty, the U.S. Government concerned that these efforts are not yet
complete.
The United States recognizes
the enforcement efforts that China has made to date, but the continuing
unacceptably high levels of piracy and counterfeiting require more effective and
coordinated action. While export of pirated copyrighted products has largely
subsided, such products are still being produced locally and imports of pirated
products from other countries continue to flood the Chinese market. The levels
of optical media piracy (CDs, VCDs and DVDs) in China remain at extremely high
levels in the domestic market, and China remains a center for entertainment
software piracy and the production of pirated cartridge-based video game
products. In particular, end-user piracy of business software within the
government remains largely unabated despite issuance of decrees instructing
government ministries to use only legitimate software. In addition, the piracy
of journals and books is a significant problem that has only now begun to show
some improvement. The counterfeiting of goods bearing American trademarks,
including well-known marks, by Chinese companies remains a major problem.
Despite some enforcement efforts against such activities, large volumes of
counterfeit goods, often of well-known products, continue to be produced and
sold in China and to be exported to many other countries.
While industries report
improved cooperation with administrative enforcement agencies in regard to
raids, administrative penalties have failed to deter further infringements.
Criminal investigations and sanctions are rare (i.e., administrative fines
imposed are nominal), and very few cases are referred to criminal prosecution.
The thresholds for initiating criminal cases for IPR infringements remain very
high. The United States urges China to ensure that U.S. trademark and copyright
holders can enforce their rights through criminal prosecutions and to ensure
that the Supreme People's Court amend its interpretations of China's Criminal
Code to allow more effective prosecution of cases and the imposition of
deterrent sentences. In addition, the United States has concerns over China's
lack of protection of foreign well-known marks in a manner that is consistent
with international standards.
Certain U.S. pharmaceutical
companies in China continue to experience difficulties in obtaining
administrative protection for their products. The United States will be
monitoring closely China's implementation of its WTO commitments, including its
commitments relating to the protection of data submitted to obtain regulatory
approval of pharmaceuticals and agricultural chemicals. The United States also
urges China to improve communication and coordination between its patent office
and agencies with responsibility for granting marketing approvals so that
patent-infringing products cannot be marketed.
PARAGUAY
The U.S. Government
identified Paraguay as a Priority Foreign Country in January 1998. The
subsequent Section 301 investigation terminated with the signing of a
comprehensive Memorandum of Understanding (MOU) on the protection of
intellectual property rights in Paraguay. Paraguayan implementation of the MOU
has been uneven. Despite some progress, such as the appointment of special
prosecutors dedicated to IPR cases, Paraguay remains a key entry and
distribution point for pirated goods destined for the Latin American market. The
United States is heartened by the seizure and destruction of millions of blank
and pirated CDs, the closure of several multi-million dollar high-tech pirate CD
factories, and a concerted effort in the latter part of 2001 to conduct frequent
and repeated raids in Ciudad del Este and other centers of counterfeiting.
However, the U.S. Government is troubled to learn that pirate optical media
production has been dispersed to smaller enterprises, in order to evade law
enforcement efforts. Moreover, the United States is discouraged by the lack of
initiative by the Customs Authorities to implement vigorous border enforcement
measures, as agreed to in the MOU. The U.S. Government intends to hold
consultations with Paraguay in the coming year to discuss plans for improving
implementation of the MOU. The U.S. Government will use these meetings to
formulate our positions on the future of the MOU, which comes up for renewal in
January 2003.