PRIORITY WATCH LIST

ARGENTINA

Argentina will remain on the Priority Watch List as its copyright, patent, and data protection regimes do not appear to comply with its international obligations. There is lax and ineffective enforcement against piracy (including rampant CD-R and videogame piracy) and counterfeiting; in addition, unauthorized use of protected seed varieties remains a problem. Enforcement fo copyrights on recorded music, videos, books and computer software remains inconsistent and inadequate resources and border controls and slow court procedures have hampered the effectiveness of enforcement efforts. In April 2002, the United States and Argentina reached an agreement with respect to most claims in a WTO dispute brought by the United States with respect to Argentina's implementation of its TRIPS obligations. Two important issues, including data protection, remain unresolved. Argentina is in the process of passing legislation to implement the terms of the April 2002 settlement, although industry has expressed concerns regarding the inadequacy of the injunctive relief provisions in the pending legislation. The USTR will monitor Argentina's compliance with the commitments made under the Bilateral Council on Trade and Investment with respect to the agreement on patents.

BAHAMAS

The United States remains concerned that The Bahamas has not implemented its commitment to the United States in 2000 to enact legislation to correct deficiencies in its copyright law. Particularly problematic are provisions in the law permitting the compulsory licensing to Bahamian cable operators of retransmission of premium cable television programming. Inadequate remuneration for the compulsory licensing of free-over-the-air broadcasts is an additional concern, particularly with respect to uses by hotels and other commercial enterprises. The U.S. Government has urged The Bahamas to enact the necessary amendments to its copyright law and will closely engage The Bahamas in the coming months to review actions in this regard. At the same time, the U.S. Government continues to encourage U.S. copyright owners and operators of premium cable services to enter into negotiations with licensed Bahamian cable companies to provide for the legitimate cable transmission of copyrighted works in the Bahamas.

BRAZIL

Brazil is both one of the largest markets globally for legitimate copyrighted products and one of the world's largest pirate markets. Losses suffered by the U.S. copyright industry are the largest in the hemisphere, with industry estimates exceeding $771 million in the 2002 due in large part to growing optical disk piracy. Problems have been particularly acute with respect to sound recordings and videocassettes, and virtually all audio cassettes sold are pirated copies. Despite having adopted modern copyright legislation that appears largely to be consistent with TRIPS, Brazil simply has not undertaken adequate enforcement actions against increasing rates of piracy. In particular, very few prosecutions and deterrent convictions result from raids. There have been recent efforts to move towards enforcing copyright protection in the tri-border area. We look forward to stepped up enforcement actions by the Brazilian Government in the near term. In addition, we encourage the incoming Brazilian administration to: initiate legislation that strengthens the Brazilian enforcement framework against copyright and trademark infringement; commit resources to a broad enforcement action plan that effectively coordinates the work performed by several federal and state authorities, including the police, customs authorities, tax authorities and the judiciary; and investigate and raid illegal domestic manufacturing sources, distribution channels and key distributors. We also look to Brazil to improve greatly the processing of patent applications in a manner that is consistent with its international obligations. We will continue to monitor Brazil's progress in these areas, including through the ongoing GSP review that was initiated by USTR in 2001.

EUROPEAN UNION

At the conclusion of the 1999 Special 301 review, the United States initiated a WTO dispute settlement case against the EU, based on the apparent TRIPS deficiencies in EU Regulation 2081/92, which governs the protection of geographical indications (GIs) for agricultural products and foodstuffs in the EU. The regulation appears to deny national treatment to foreign GIs. According to the plain language of the regulation, only EU GIs may be registered. With respect to trademarks, the regulation permits dilution and even cancellation of trademarks when a GI is created later in time. Our initial WTO consultation request alleged that this regulation denies national treatment to foreign geographical indications, and does not provide sufficient protection to trademarks that are similar or identical to a GI and is, therefore, in violation of the TRIPS Agreement. The United States requested consultations regarding this matter on June 1, 1999, and numerous consultations have been held since then. However, to date, we have not reached a mutually agreeable solution. While the EU has recently issued some amendments to its regulation, these amendments do not address our principal concerns with respect to full national treatment and appropriate protection for trademarks. Finally, lack of full implementation of the EU Biotech Directive by EU member states is also of concern.

INDIA

Indian intellectual property protection continues to be weak. There are some tenuous first signs that the situation may be changing, as witnessed by the passage of long-awaited patent law amendments in May 2002. However, this law still appears to contain several TRIPS inconsistencies. In addition, piracy of copyrighted works remains a problem, particularly popular fiction works and certain textbooks, and protection of foreign trademarks remains difficult. India should adopt immediately amendments to its copyright law fully and correctly implementing the WIPO Internet Treaties and correcting TRIPS deficiencies in its protection of computer software. Counterfeiting is rife in the Indian marketplace, for example in the auto, pharmaceutical, consumer goods and apparel industries. Particularly troubling are extensive public health and safety risks posed by counterfeit medicines and auto parts. To make matters worse, a major problem is India's export of counterfeit goods to the Middle East, southern Africa and Europe. While the United States is encouraged by the Indian Government's recent statements, especially concerning the implementation of data exclusivity regulations, action has yet to be been taken. We urge the Indian Government to issue data protection regulations that reflect the internationally recognized standard of protection for undisclosed test data and to ratify and implement the two WIPO Internet Treaties.

INDONESIA

Indonesia took some noteworthy steps to strengthen its IPR regime over the past year, but significant problems remain. The Indonesian Government enacted an extensive revision of its copyright law in July 2002, that addressed a number of concerns of the United States. It initiated public awareness campaigns and began addressing problems of interagency coordination. However, overall protection of intellectual property rights remains weak. The Indonesian Government has been drafting regulations governing optical media production for over a year, and they are now scheduled to be issued in July 2003, but has not firmly committed to seizing and destroying machinery and materials used in piracy. Meanwhile, U.S. industry continues to report increases in illegal optical media production lines for both domestic consumption and export. U.S. copyright industries estimate $253 million in losses in 2002, an increase of more than one-third since 2001. U.S. industry also has raised serious concerns about trademark violations of a wide range of products. While the number of raids against retail outlets for pirate optical media products has increased, long delays remain in prosecuting intellectual property cases and the Indonesian Government has not promulgated sentencing guidelines with deterrent penalties. The United States provided Indonesia with a new IPR action plan in May 2002, which contains specific recommendations for improving the legal and enforcement system, and urges Indonesia to continue working with the United States under the Trade and Investment Framework Agreement to implement the recommendations in the work plan.

LEBANON

The United States remains concerned by Lebanon's severe copyright piracy problem and the lack of a comprehensive governmental commitment to eliminate piracy and foster legitimate business. Despite the entry into force in 1999 of a new copyright law, there has been little action by Lebanon against piracy. Some raids of pirate stores and operations occurred in 2002, leading to the first sentencing of a software pirate and financial penalties in other cases. However, pervasive cable piracy continues to undermine legitimate theatrical, video, and television service providers. Overall Lebanon had made little progress in 2002 in addressing its significant IPR deficiencies. The United States urges the Lebanese Government to press forward with its recent proposal to draft a law regulating the cable television industry and to mount an aggressive campaign against pirates. End-user piracy of computer software is widespread among large companies, banks, trading companies, and most government ministries. Also troubling is an overly broad software exception for certain educational uses in the new copyright law that seriously undermines the viability of this market for legitimate products. Book piracy also remains a serious problem. A 2001 petition by U.S. industry to suspend Lebanon's benefits under the GSP trade program is under review by the U.S. Government. A committed and vigorous program to enforce intellectual property rights, particularly copyright protection, is essential to the success of the Lebanese Government's efforts to reform its economy, increase trade and foreign direct investment and prepare for accession to the WTO.

PHILIPPINES

The Philippines has taken some steps to strengthen IPR legislation and enforcement, including providing patent protection to plant varieties; enhancing the ability of the Customs Bureau to stop IPR violations at ports of entry, and increasing the number of raids on suspected counterfeiters. Nonetheless, U.S. industry continues to report wide-ranging concerns. Optical media piracy has exploded in the past year and the Philippines has gone from being a net importer to being a net exporter of pirated optical media. Counterfeit products produced, marketed in, or exported from the Philippines include clothing, medicines, consumer electronics, automotive products, cosmetics and toys. Piracy of books, cable television, and software, especially by end-users, remains significant. The pharmaceutical industry has raised concerns about data exclusivity and enforcement issues. Evidence suggests the Philippines has become a "safe haven" for organized piracy and counterfeiting as neighboring economies improve their IPR enforcement. U.S. industry reports that counterfeit pharmaceutical products account for 30 percent of the market, increasingly threatening legitimate distribution channels and raising serious public health resources. The U.S. Government provided the Philippines with an IPR action plan in August 2002 with specific recommendations on judicial, legislative/regulatory, and enforcement issues, but the Philippines has yet to respond effectively to this plan. A key recommendation was to enact optical media legislation, but an optical media bill languishes in a Senate committee, and the Government of the Philippines has not made its passage a priority. The U.S. Government urges the Philippines to pass the optical media bill, criminally prosecute IPR violators, expedite pending IPR cases, establish deterrent penalties for IPR violators, and implement the WIPO digital treaties.

POLAND

Despite intensified USG engagement with the Polish government, the IPR situation in Poland has not improved since the 2002 review. The main concern substantively with Poland is the lack of political will by the Polish Government to shut down the open air market inside the Government owned Warsaw Stadium, which is awash in pirated optical media products and counterfeit goods. Although police raids at the stadium occur, the penalties imposed after prosecutions are light, if imposed at all, and do not act as a deterrent to continued illegal trade. In addition to the Stadium problem, optical disc piracy in Poland is on the rise and becoming a greater problem. While Poland has nine operating optical disc plants that produce legitimate products, we are concerned that pirated product may be produced at some of these plants as well. Pirate optical media product is entering Poland via its porous borders, and there are reports of exported pirated product to other Eastern and Western European countries. Given the growing problem of optical disc piracy, legislation is needed to control optical media production in Poland. We urge the Polish Government to swiftly enact an optical disk licensing regime and significantly improve enforcement in the major cities and border towns.

In addition, despite a new pharmaceutical law that came into effect on October 1, 2002, there are still significant shortcomings with the protection of confidential test data submitted for marketing approval. Specifically, the fact that data protection is linked to the existence of a patent is troubling, since these two types of rights, patent protection and data protection are independent of each other. Also problematic is the fact that the period of protection is calculated based on first registration globally, which significantly diminishes the period of protection in Poland, since most pharmaceuticals are first registered outside of Poland.

RUSSIA

Although Russia has made considerable progress in revising several of its intellectual property laws over the past year, Russia still needs to enact amendments to its copyright law to bring it into conformity with TRIPS Agreement requirements. In addition, ineffective enforcement of its laws, in particular, copyright and trademark laws, remains a serious concern. While Russia took some actions in 2002 to improve coordination on IPR enforcement, piracy of works on optical media is a large and growing problem. The number of optical media facilities has doubled since 2001. Further enforcement action, such as the recent Russian Anti-Piracy Program (RAPO) raid on a DVD plant in Russia responsible for up to 30% of the pirated DVDs on the Russian market, will be necessary to continue to combat this problem. Weak protection of intellectual property rights, results in substantial losses to U.S. industry annually. We urge the Russian Government to close immediately the plants producing illegal optical disks; adopt a comprehensive optical media regulatory and enforcement scheme; combat organized crime involvement through specialized enforcement units and the enactment of tough penalties for organized crimes; enact and enforce effective border measures to stop the export and import of counterfeit and pirated products; significantly improve criminal investigations and raids against pirates engaged in commercial distribution of counterfeit and pirated products; and make the necessary legal reforms to the copyright law, and facilitate stronger and more effective IPR enforcement compatible with international standards including those in the TRIPS Agreement and the WIPO internet treaties.

TAIWAN

Taiwan declared 2002 an "Action Year for IPR" and considered new initiatives to improve legislation, strengthen enforcement, encourage speedy trials, and promote deterrent-level sentencing. In 2003 Taiwan took some concrete positive steps to bolster its enforcement capability, including expanding an interagency IPR task force to 220 people, and opening warehouses to store seized pirated goods and manufacturing equipment. The administration also introduced for consideration by its legislature an amended copyright law meant to strengthen protection of IPR and bring Taiwan into compliance with its obligations under the TRIPS Agreement and other international IPR standards. However, these positive steps have not produced results, and piracy and counterfeiting levels remain unacceptably high. Taiwan is one of the largest sources of pirated optical media products in the world and corporate end-user piracy and trademark counterfeiting are at high levels. U.S. companies continue to report significant problems in protecting and enforcing their IPR. Official raids are hampered by lack of expertise and poor interagency coordination; resulting penalties are neither timely nor strong enough to deter infringement. The lax protection of IPR, including lack of enforcement against piracy and trademark counterfeiting in Taiwan therefore remains a serious concern for the U.S. Government. The United States will continue our dialogue with Taiwan on the protection and enforcement of IPR during the coming year to help improve the situation.