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Annual IPR Report Warns of Trade Secret Theft, Online Piracy, Market Access Barriers

Monday, May 04, 2015
Sandler, Travis & Rosenberg Trade Report

The Office of the U.S. Trade Representative released April 30 its annual Special 301 report on the adequacy and effectiveness  of U.S. trading partners’ protection and enforcement of intellectual property rights. This year’s report reviews 72 trading partners and lists 37 of them as meriting particular concern.

According to USTR, this report identifies a wide range of concerns, including (a) reported inadequacies in trade secret protection in China, India and elsewhere, as well as an increasing incidence of trade secret misappropriation; (b) troubling “indigenous innovation” policies that may unfairly disadvantage U.S. rights holders in China; (c) the continuing challenges of online copyright piracy in countries such as Brazil, China, India and Russia and trademark counterfeiting in China and elsewhere; and (d) market access barriers, including nontransparent and discriminatory measures, that appear to impede access to products embodying IPR and measures that impede market access for U.S. entities that rely upon IPR protection.

Positive Developments. The report highlights the following achievements by U.S. trading partners in 2014 to resolve and address IPR issues of concern.

- High-level planning documents issued by China articulated a commitment to protect and enforce IPR, to allow industry and entrepreneurs a greater voice in policy development, and to allow market mechanisms to play a greater role in guiding research and development efforts. China has also continued an ongoing overhaul of its intellectual property laws.

- Administrative enforcement reforms in the Philippines have resulted in streamlined procedures, enhanced interagency cooperation and more enforcement action, including increased seizures of pirated and counterfeit goods.

- The Communications Regulatory Authority in Italy adopted regulations to combat copyright piracy over the Internet that provide notice-and-takedown procedures that incorporate due process safeguards and establish a mechanism for addressing large-scale piracy. Italy’s subsequent implementation of the regulations has been positive, resulting in successful enforcement actions against several websites that offered infringing content.

- The Ministry of Justice in Latvia has drafted new five-year guidelines regarding IPR protection that promote advanced research and innovation, training of customs officials and police, exchanges among judges and prosecutors, intellectual property education in universities, and public awareness about the importance and benefits of IPR.

- Denmark has established a unit to be housed under the Danish Patent and Trademark Office that will assist in enforcement efforts by serving those consumers and businesses that have allegedly been the victims of patent, design and trademark infringement. The unit has no direct enforcement authority but will collect and assess evidence of alleged infringement and provide such evidence to appropriate law enforcement agencies for further consideration.

- Paraguay and the Philippines have committed to a whole-of-government approach to IPR enforcement that has been critical to enhancing the effectiveness of IPR enforcement and resulted in positive reports from a number of affected stakeholder groups.

Negative Trends. Industry reports the following trends in counterfeiting and piracy.

- Even when criminal enterprises engaged in global copyright piracy and trademark counterfeiting operations are investigated and prosecuted, the penalties imposed on them in many countries are low and therefore do not deter further infringements.

- Online sales of pirated and counterfeit goods have the potential to surpass the volume of sales through traditional channels such as street vendors and other physical markets, but enforcement authorities face difficulties in responding to this trend.

- The continued increase in the use of legitimate express mail, international courier and postal services to deliver counterfeit and pirated goods in small consignments makes it more challenging for enforcement officials to interdict these goods.

- The practice of shipping products separately from counterfeit labels and packaging to evade enforcement efforts that target the completed counterfeit item continues.

- Media box-based piracy, whereby storage devices, often with capability to play high definition content, are loaded with large quantities of pirated works or are configured to facilitate the user’s access to websites featuring unlicensed content, is growing in popularity, reportedly in China, Hong Kong, Indonesia, Malaysia, Taiwan, Thailand and Vietnam.

  

Priority Watch List. Trading partners on the PWL present the most significant concerns regarding insufficient IPR protection or enforcement or actions that otherwise limited market access for persons relying on IPR protection. Thirteen countries – Algeria, Argentina, Chile, China, Ecuador, India, Indonesia, Kuwait, Pakistan, Russia, Thailand, Ukraine and Venezuela – are on the PWL this year and will be the subject of particularly intense bilateral engagement during the coming year.  

Watch List. Twenty-four trading partners are on the WL and also merit bilateral attention to address underlying IPR problems:  Barbados, Belarus, Bolivia, Brazil, Bulgaria, Canada, Colombia, Costa Rica, Dominican Republic, Egypt, Greece, Guatemala, Jamaica, Lebanon, Mexico, Paraguay, Peru, Romania, Tajikistan, Trinidad and Tobago, Turkey, Turkmenistan, Uzbekistan and Vietnam. 

China. The report draws attention to new and longstanding concerns about IPR protection and enforcement in China, including with respect to trade secret misappropriation and technology localization. Such new measures include conditioning market access on the use of Chinese indigenous IPR, research and development being conducted in China and the provision of source code to the Chinese government.

  

India. There has been increased engagement on IPR concerns with India following a 2014 out-of-cycle review. India will remain on the PWL this year, but USTR expects that the new channels for engagement created in the past year will bring about substantive and measurable improvements in India’s IPR regime. No further OCR is being announced at this time, but USTR will monitor progress over the coming months and is prepared to take further action if necessary.

  

Out-of-Cycle Reviews. USTR has noted the willingness of Turkmenistan and Tajikistan to work with the U.S. on improving their IPR protection and enforcement regimes and will conduct an OCR for each country to evaluate whether specific steps taken merit their removal from the Watch List.

USTR is extending the current OCR of Paraguay to provide additional time for the conclusion of a bilateral memorandum of understanding on IPR. If this is not done by June 30 USTR will evaluate possible implications, including with respect to Paraguay’s status under Special 301.

To determine whether to place Honduras on the Watch List, USTR will conduct an OCR to assess whether Honduras has acted to address widespread cable and satellite signal piracy, including through increased regulatory oversight, strengthened criminal IPR enforcement capacity, increased clarity in procedures relating to geographical indications, and improved the protection of test or other data generated to obtain marketing approval for certain regulated products.

Spain is not listed in the 2015 report but USTR is continuing an OCR of this country announced in 2013 to review concrete steps taken to combat copyright piracy over the Internet.

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