SECTION 306
CHINA
The United States and China
concluded bilateral intellectual property (IP) 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 implement fully its
IP obligations from the date it became a WTO Member.
China's WTO accession, and
the concomitant entry into force of its intellectual property rights (IPR)
obligations have resulted in improvements in China's statutory system for the
protection of intellectual property. However, significant concerns remain,
particularly with respect to enforcement of IPR. The TRIPS Agreement requires
China to implement effective enforcement procedures and provide remedies that
have a deterrent effect. Although China has revised its IP laws and regulations
to strengthen administrative enforcement, civil remedies and criminal penalties,
violations of IPR are still rampant. The lack of transparency and coordination
among Chinese government agencies, local protectionism and corruption, high
thresholds for criminal prosecution, lack of training and weak punishments all
hamper enforcement of IPR. China remains one of the last countries in the world
that fails to use, in practice, its criminal law to go after commercial
copyright pirates and trademark counterfeiters.
In the field of trademark
protection, we are concerned that foreign trademark owners do not appear to be
receiving national treatment with regard to their well-known marks. China has
recognized nearly 200 marks as "well-known," none of which is a foreign mark.
Another national treatment concern was addressed, however, in late 2002, when
China amended its regulations to permit foreign-invested enterprises to file for
trademarks without an agent, something only Chinese companies previously had
been entitled to do.
We urge China to pursue a
sustained, transparent effort to punish and deter copyright piracy, trademark
counterfeiting and trade in pirated and counterfeit products; dedicate more
resources to enforcement, and undertake more frequent, unannounced police raids
in pursuit of IPR infringers; increase coordination between the various national
and local authorities charged with IPR enforcement; ensure that China's
officials take a serious and consistent approach to sentencing, including
setting and enforcing deterrent levels of fines; and reduce the high thresholds
for criminal prosecutions that, in practice, prevent effective application of
China's criminal law to IPR violators; provide adequate training for patent and
trademark examiners and IP enforcement agents; and ensure that criminal action
can be taken against exports of pirated or counterfeit product. As a priority
matter, China should ratify and implement the two WIPO Internet Treaties at the
earliest possible opportunity.
PARAGUAY
Paraguay continues to have
problems in providing protection to copyrights and trademarks, both with respect
to poor internal enforcement and weak border enforcement. The USTR identified
Paraguay as a Priority Foreign Country in January 1998 as part of Special 301
Out of Cycle Review. The subsequent 301 investigation terminated with the
signing of a comprehensive Memorandum of Understanding (MOU) on the protection
of intellectual property in 1998. We still are concerned by several issues,
including: the involvement of organized crime in piracy and counterfeiting
operations; the relatively few resources that are provided for criminal
investigations, raids and investigations, and the attendant lack of those
activities; and the lack of willingness on the part of the judiciary to impose
deterrent sentences. The MOU expired in January of 2003, but USTR and Paraguay
have agreed to extend the provisions of the understanding until it can be
renegotiated, likely in the fall of 2003. At that time we will review Paraguay's
progress in meeting the requirements of the MOU as well as the other matters in
order to determine the appropriate goals for any renegotiated MOU.