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Special 301 IPR Report Downgrades Ukraine, Warns of Trade Secret Theft

Monday, May 06, 2013
Sandler, Travis & Rosenberg Trade Report

The Office of the U.S. Trade Representative has released its annual Special 301 report on the adequacy and effectiveness of U.S. trading partners’ protection and enforcement of intellectual property rights. USTR reviewed 95 trading partners for the 2013 report and listed 41 of them as meriting particular concern. According to USTR, this report identifies a wide range of concerns, including the continued deterioration in IPR protection, enforcement and market access in Ukraine; the growing problem of misappropriation of trade secrets in China and elsewhere; indigenous innovation policies in China; and the continuing challenges of copyright piracy over the Internet in countries such as Brazil, Italy and Russia.

Positive Developments. The report identifies the following positive developments over the past year.

- The Copyright Royalty Tribunal of the Bahamas took action to pay royalties due to U.S. rights holders.

- Brunei created its first patent office and enacted patent law amendments that significantly strengthen its patent regime.

- Canada enacted the long-awaited Copyright Modernization Act, which among other things is designed to implement Canada’s obligations under the WIPO Internet treaties and address the challenges of copyright piracy in the digital age, and introduced legislation to provide ex officio authority to customs officials.

- China issued a judicial interpretation making clear that those who facilitate online infringement will be held jointly liable for that conduct.

- Israel enacted a law improving its procedures for the publication of patent applications.

- Laos joined the World Trade Organization and enacted a sweeping reform of its laws governing IPR protection and enforcement.

- The Philippines passed legislation to implement the WIPO Internet treaties and provide ex officio authority for customs officials.

- Russia developed an IPR action plan with the U.S., enacted a law to establish a specialized IPR court and revised criminal thresholds for copyright piracy.

- Taiwan increased deterrent penalties for trade secret misappropriation and launched a two-year pilot program to help create a more stable market for medicines in the health care system.

- Turkey established specialized enforcement offices for IP crimes in 81 cities.

Ukraine a Priority Foreign Country, Could Lose GSP Eligibility. The report designates Ukraine a priority foreign country, the first such designation in 11 years. USTR cites Ukraine’s persistent failure to meet its commitments to improve IPR protection, a severe deterioration of enforcement in the areas of government use of pirated software and piracy over the Internet, and the denial of fair and equitable market access through the authorization and operation of copyright collecting societies. Over the last two years Ukraine has moved from the Watch List to the Priority Watch List to designation as a PFC.

USTR will now have 30 days to decide whether to initiate a Section 301 investigation against Ukraine. The report notes that when Ukraine was designated a PFC in the past it failed to address the grounds for that designation during the subsequent investigation and lost its eligibility for benefits under the Generalized System of Preferences until those issues were addressed.

Priority Watch List. Ten countries were placed on the Priority Watch List for failing to provide an adequate level of IPR protection or enforcement or market access for persons relying on IPR protection: Algeria, Argentina, Chile, China, India, Indonesia, Pakistan, Russia, Thailand and Venezuela. Canada and Israel were both moved down from the PWL to the Watch List this year.

Watch List. Barbados, Bulgaria, Paraguay, and Trinidad and Tobago have been added to the Watch List due to specific problems, Canada and Israel have been moved down from the PWL, and Brunei and Norway were removed. Remaining on the Watch List this year are Belarus, Bolivia, Brazil, Colombia, Costa Rica, Dominican Republic, Ecuador, Egypt, Finland, Greece, Guatemala, Italy, Jamaica, Kuwait, Lebanon, Mexico, Peru, Philippines, Romania, Tajikistan, Turkey, Turkmenistan, Uzbekistan and Vietnam.

Out-of-Cycle Reviews. While El Salvador and Spain are not listed in any of the above categories, USTR will conduct out-of-cycle reviews to assess progress on (a) Spain’s steps to combat copyright piracy over the Internet and (b) El Salvador’s implementation of new legislation on pharmaceuticals. USTR will also conduct an OCR on notorious markets again this fall.

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