along with fines levied between the equivalent of $30,000 and $228,000. The most progress seems to be occurring with respect to video distribution: Youku.com and Toudu.com have entered into licensing agreements with major U.S. studios to stream their movies and television programming, thereby starting to shift their business models from offering pirated content to providing legitimately licensed content. The United States is also encouraged by media reports that Baidu, recently listed for the fifth year in a row in the USTR Notorious Markets report, will be launching a licensed music search service soon. At this moment it appears that a licensing agreement has only been reached with Chinese rights holders. The United States urges Baidu to reach a similar agreement with U.S. rights holders, and eliminate all pirated music from their site. Recent reports also indicate that Baidu has removed 2.8 million items from an online library after Chinese authors complained it was distributing their works without permission. However, the publishing industry continues to report problems involving unauthorized distribution of electronic journals in libraries.
Counterfeiting Issues
China's global manufacturing capacity also extends to all phases of the production and global distribution of counterfeit goods. According to industry reports, the range of goods counterfeited in China includes apparel and footwear, mobile phones, pharmaceuticals and medical equipment, herbal remedies, wine and liquor, other beverages, agricultural chemicals, electronic components, computer and networking equipment, software and related products, batteries, cigarettes, cosmetics, home appliances, cement, and auto parts, as well as merchandise based on copyrighted works. Many of these activities can be traced back to Guangdong Province. Traditional counterfeit markets, such as the Silk Market in Beijing or wholesale markets like Yiwu City, are no longer the only places where these counterfeits are pervasive. Increasingly, the use of online sales platforms and global express delivery services are facilitating international distribution of these counterfeit goods.
With respect to Internet distribution, the past year has seen some positive developments, in part due to the Special Campaign. These developments include new measures issued by the State Administration of Industry and Commerce (SAIC) that require ISPs to verify the identity of online traders and to take "necessary measures to protect registered trademarks." Local AICs have also demonstrated greater willingness to intervene directly against online advertisements of fake products. Recently, one of the largest online platforms for sales of counterfeit goods, Taobao, launched a new initiative to examine advertising and sale activities using its platform, and to provide leads to Chinese law enforcement authorities regarding infringing activities. In this connection, the fashion industry reports that it has been approached by Chinese enforcement authorities seeking information to support criminal prosecutions against online traders caught with large quantities of counterfeit products in their warehouses. The United States urges other online platforms, especially those cited in the "Notorious Markets" report, to follow Taobao's lead to increase cooperation with Chinese police and U.S. rights holders. The United States also encourages Chinese enforcement agencies to reach out not only to the larger foreign enterprises, but also to small and medium enterprises that are also being injured by counterfeit goods.
Despite these positive developments, including the raids that have taken place under the Special Campaign, the United States is troubled by China's May 2010 prosecution guidelines that tripled the threshold for investigating and prosecuting trade in counterfeit products. High thresholds for initiating criminal actions have always been a significant barrier to effective enforcement against the sale of counterfeits. Raising these thresholds introduces new problems into an already difficult
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