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Intellectual Property

Special 301

Under the Special 301 provisions contained in the Omnibus Trade and Competitiveness Act of 1988, as amended in the Uruguay Round Agreements Act of 1994, USTR is required to identify those countries that deny adequate and effective protection for intellectual property rights or deny fair and equitable market access to persons that rely on intellectual property protection. The Special 301 provisions require that countries that have the most egregious practices with the greatest adverse impact on U.S. trade must be designated as a "Priority Foreign Country." USTR is then required to initiate a Section 301 investigation of the intellectual property practices of such countries within 30 days of the annual April 30 deadline. USTR created two additional country classifications, referred to as "Priority Watch List" and "Watch List" countries, to allow the flexibility to encourage countries to improve intellectual property rights protection without having to designate a country as a "Priority Foreign Country" and initiate a Special 301 investigation.

In the 2000 review, USTR focused on (1) ensuring proper and timely implementation of the WTO TRIPs Agreement; (2) cracking down on pirated production of optical media such as CDs, VCDs, DVDs, and CD-ROMs; and (3) ensuring that government ministries only use authorized software. In light of these objectives, USTR decided to initiate World Trade Organization (WTO) dispute settlement consultations with Argentina and Brazil and request the establishment of a dispute settlement panel with Denmark. This decision brings to 14 the number of WTO intellectual property complaints filed by the United States since 1996. In its annual report, USTR also noted the Clinton Administration policy on health-related intellectual property matters previously discussed in Section 2.

The 2000 Special 301 Review identified 59 countries as lacking adequate and effective protection of intellectual property rights. USTR identified Ukraine for potential Priority Foreign Country designation on August 1, 2000, a decision that was deferred to March 1, 2001, after Ukraine made some progress in addressing optical media piracy issues. USTR remains concerned about high levels of copyright piracy in Ukraine, which is the single largest source of pirated CDs in Central and Eastern Europe. Paraguay and China were once again designated for special monitoring under Section 306 of the Trade Act of 1974, which authorizes USTR to impose trade sanctions if the commitments of a bilateral agreement are breached. The United States remains concerned that Paraguay has made only limited progress in improving enforcement of its copyright and trademark laws. With regard to China, the United States is concerned about end-user piracy of business software, retail piracy, trademark counterfeiting, and inadequate administrative protection for pharmaceuticals. The November 1999 WTO U.S.-China bilateral accession agreement and China’s commitment to implement the TRIPs agreement upon WTO accession will help to address these concerns.

The 2000 Special 301 Review placed 16 countries on the "Priority Watch List," signifying that the United States will monitor their efforts to improve their intellectual property rights protection: Argentina, the Dominican Republic, Egypt, the EU, Greece, Guatemala, India, Israel, Italy, Korea, Malaysia, Peru, Poland, Russia, Turkey, and Ukraine. Piracy of music CDs, video CDs, and CD-ROMs remains a serious problem in Israel, Ukraine, and the Dominican Republic. Argentina’s patent regime denies adequate and effective protection for U.S. patent owners, particularly in the pharmaceutical and agricultural chemical industries. Software piracy in Argentina is also a continuing concern, although Argentina has ratified the WIPO Copyright Treaty and Performance and Phonograms Treaty. Egypt’s patent law excludes pharmaceutical products from patentability and Egypt has announced that it intends to use the full transition period (until January 1, 2005) for product patent protection. Its new decree providing for exclusive marketing rights for pharmaceutical and agricultural products is still be reviewed, and USTR found that enforcement of Egypt’s trademark laws remains lax. USTR also cited the EU’s regulations concerning geographical indications for foodstuffs and agricultural products, which deny national treatment and do not provide adequate trademark protection. USTR initiated WTO dispute settlement proceedings on these issues in 1999. USTR also noted serious concern on penalty issues in Guatemala and Italy, pharmaceutical and other issues in India, Korea, and Poland, and enforcement issues in Korea, Malaysia and Russia. In November 2000, Italy and Poland were moved from the "Priority Watch List" to the "Watch List" after USTR announced that Italy had passed a new anti-piracy law to strengthen penalties for IPR theft and that Poland had addressed some copyright issues.

A total of 39 countries were placed on the "Watch List" in April 2000. Countries that were placed on the "Watch List" for the first time are Kazakhstan, Latvia and Lithuania. Other countries on the "Watch List" are Armenia, Azerbaijan, Belarus, Bolivia, Brazil, Canada, Chile, Colombia, Costa Rica, Czech Republic, Denmark, Ecuador, Hungary, Indonesia, Ireland, Jamaica, Kuwait, Lebanon, Macau, Moldova, Oman, Pakistan, the Philippines, Qatar, Romania, Saudi Arabia, Singapore, Spain, Taiwan, Tajikistan, Thailand, Turkmenistan, Uruguay, Uzbekistan, Venezuela, and Vietnam. Ireland was removed from the Watch List in November 2000 after it adopted new copyright legislation.

USTR announced that "out-of-cycle" Special 301 reviews would be conducted for El Salvador and the West Bank and Gaza in September and December 2000.

USTR is currently considering public comments in making its Special 301 country determinations for its 2000 Special 301 Annual Review.

WTO Dispute Settlement

The United States has brought 14 intellectual property rights cases before the WTO since 1996. It has been successful in a number of cases in forcing WTO member countries, such as India, Portugal, Sweden, Turkey, Ireland, Greece, and the EU, to move toward compliance with their obligations under the WTO TRIPs agreement. Sweden and Ireland have passed legislation to strengthen enforcement of their intellectual property laws, and Greece has enacted legislation to prevent copyright infringement by television stations.

On May 30, 2000, the United States initiated WTO dispute settlement proceedings against Brazil, challenging Brazil’s requirement that patent owners manufacture their products in Brazil in order to maintain full patent rights. Consultations were held in June and December 2000. On January 8, 2001, the United States requested establishment of a panel, and it was established on February 1, 2001. USTR also expanded its complaint against Argentina, originally initiated in May 1999. The United States originally challenged Argentina's failure to provide a system of exclusive marketing rights for pharmaceutical products and expanded this claim to include concerns over Argentina’s failure to protect confidential test data, its denial of exclusive rights for patents, its failure to provide provisional measures, such as preliminary injunctions, to prevent infringements of patent rights; and its exclusion of certain subject matter from patentability. Consultations were held in July and November 2000.

In the ongoing case of the United States’ challenge to Canada’s patent term, the WTO Appellate Body ruled in May 2000 that Canada’s 17-year patent term was inconsistent with its TRIPs obligations. Arbitration is ongoing to determine the period of time for Canada to comply.

Optical Media Products Piracy, Organized Crime and End-User Piracy of Software

The copyright industry is increasingly using a common set of media to distribute their products worldwide, including compact disc (CD), video CD, CD-ROM, and Digital Versatile Disk (DVD), known collectively as "optical media." There has been rapid growth in the capacity for producing optical media products. Much of the world excess production capacity (with capacity now estimated at twice world demand) is being used to produce pirated optical media products, such as films, music and sound recordings, and computer software (both business and entertainment) on CDs and CD-ROMs. Such pirating poses a serious threat to every sector of the U.S. copyright industry. Piracy of computer software alone is estimated to cost the U.S. computer software industry over $11 billion per year in sales, and total worldwide piracy is estimated to cause between $20 and $22 billion in losses to U.S. copyright-based companies annually. Israel, Ukraine, and the West Bank and Gaza remain of particular concern as producers of pirate CDs and CD-ROMs that are exported worldwide. In June 2000, USTR announced that Ukraine was developing a modern IPR regime and making progress in addressing these piracy issues, although its progress must continue to be monitored. Over the past year, Macau, Malaysia and Thailand have also taken important steps to adopt controls on optical media production, but also require continued monitoring.

Efforts to combat optical media piracy should remain an Administration priority this year. While the U.S. government should continue to pursue the elimination of optical media piracy through traditional intellectual property right enforcement mechanisms, such as Special 301, GSP, and the TRIPs agreement, because of the ease of production and distribution of pirated optical media products, these enforcement methods may be insufficient to prevent the spread of digital piracy. It is, therefore, important that the U.S. government continue to urge that countries of concern undertake to create a regulatory framework for licensing optical media production and tracking raw materials inputs in order to establish an effective system to deter piracy.

The Administration should also sustain its efforts to combat end-user piracy of computer software, which is the greatest single source of software piracy. In many countries, government entities are the major users of software, both legal and illegal. It is imperative that foreign governments make the issue of legal use of software a priority. USTR has made progress in convincing China, Paraguay, Colombia, the Philippines, and Jordan to issue directives mandating that government ministries use only authorized software.

Implementation of World Intellectual Property Organization Treaties

Strong intellectual property protections are essential to the promotion of further growth in the Internet and digital trade. To that end, the World Intellectual Property Organization (WIPO) adopted the WIPO Copyright Treaty (WCT) and the WIPO Performances and Phonogram Treaty (WPPT) in December 1996, which provide a basic framework for minimum standards of copyright protection for the online distribution of copyrighted works. The United States implemented the two WIPO treaties under Title I of the Digital Millennium Copyright Act of 1998 and ratified them in September 1999. The 1998 Act prohibits the circumvention of technological measures that control the access to copyrighted works on computer networks and their unauthorized reproduction, as well as the importation, manufacture, or sale of devices used to circumvent such technological protections. The 1998 Act also prohibits the removal or alteration of copyright management information used to identify a work on computer networks. Civil and criminal remedies enforce these provisions, with certain exceptions for innocent violations, libraries, and educational institutions.

Digital piracy is a serious threat to global electronic commerce. The WIPO treaties are a significant step toward guaranteeing the protection of copyrighted materials on the Internet and fostering the growth of electronic commerce. Thirty countries must ratify the WIPO treaties in order for them to enter into force. It is critical that the United States press for early ratification and full implementation of the WIPO treaties in the 30 countries needed to put the treaties into force. As of February 2001, 22 countries have ratified the WCT and 20 countries have ratified the WPPT. Jordan agreed to implement the WIPO Treaties as part of the U.S.-Jordan Free Trade Agreement and the Clinton Administration proposed ratification of the WIPO treaties as part of the FTAA Chapter on Intellectual Property Rights. Private sector participants in WIPO’s Industry Advisory Commission are also urging WIPO to encourage the harmonized implementation of the WIPO treaties.

WTO Agreement on Trade Related Aspects of Intellectual Property Rights

The TRIPs Agreement came into force on January 1, l995, with a phase-in of some obligations under the agreement, based on a country’s level of development. Developed countries were required to implement the agreement by January 1, l996; developing countries had to implement by January 1, 2000, and the least-developed countries must implement by January 1, 2006.

In December 1999, USTR announced that it would conduct a special out-of-cycle Special 301 review in order to assess the progress made by developing countries in meeting their TRIPs obligations. USTR found that while "substantial progress" was made by developing countries, there are a number of countries that are still in the process of implementing legislation and others that are much farther from implementation. As a result of that review, USTR launched WTO dispute settlement consultations with Brazil and subsequently requested the formation of a WTO panel, and expanded its current WTO consultations with Argentina. USTR is also continuing to work with other developing countries to assist them in implementing their TRIPS commitments.

As discussed in Section 4, in January 2000, a number of WTO member countries asked the WTO General Council to grant them a blanket extension of implementation deadlines for a number of WTO agreements, including the TRIPs agreement. The United States and other countries refused to support a blanket extension of the implementation of the TRIPs Agreement, preferring to review the issue on a case-by-case basis. The United States has also reserved its right to bring challenges under WTO dispute settlement procedures against countries that failed to meet the January 1, 2000 TRIPs implementation deadline. Efforts to provide for greater flexibility in the TRIPs and WTO agreements continued throughout 2000, but there was no consensus on extending the deadlines for TRIPs implementation. It is vital that the United States follow through with its commitment to make appropriate use of the WTO dispute settlement process against developing countries that have failed to comply with the TRIPs Agreement.

It is also important that the United States continue to oppose the reopening of the TRIPs agreement. The WTO built-in agenda already provides an active program for review of the TRIPs agreement. The agenda includes (1) the review, mandated by TRIPs article 27.3 (b), of the exclusions from patentability for certain plants and animals, (2) the review by the TRIPs Council, mandated by Article 71.1, of TRIPs implementation, and (3) the TRIPs Council’s review of the TRIPs agreement itself in 2002. In keeping with this built-in agenda, the focus must remain on achieving full implementation of the TRIPs Agreement.

In WTO accession negotiations, the United States should insist that acceding countries be required to implement the TRIPs agreement immediately upon accession without transition.

ECAT POSITION: ECAT supports U.S. efforts to secure full implementation of the TRIPs Agreement by insisting on adherence to existing transition deadlines, opposing any moratorium on dispute settlement cases, and making aggressive use of WTO dispute settlement procedures to enforce the agreement. ECAT urges the Administration to make every effort to encourage countries to ratify the WIPO copyright treaties, so that they may enter into force by the end of this year and to continue to promote strong intellectual property protection for digitized trade. ECAT supports efforts to combat piracy of optical-media products through effective enforcement and regulation, and to combat end-user software piracy, particularly by foreign governments.


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