Special 301 Report/2015/Section 1

by Office of the United States Trade Representative

SECTION I. DEVELOPMENTS IN INTELLECTUAL PROPERTY RIGHTS PROTECTION AND ENFORCEMENT

An important mission of USTR is to support and implement the Administration's commitment to vigorously protect the interests of American holders of IPR in other countries while preserving the incentives that ensure access to, and widespread dissemination of, the fruits of innovation and creativity. IPR infringement, including trademark counterfeiting and copyright piracy,^[1] causes significant financial losses for rights holders and legitimate businesses around the world. It undermines U.S. comparative advantages in innovation and creativity, to the detriment of American businesses and workers. In its most pernicious forms, IPR infringement endangers the public. Some counterfeit products, including semiconductors, automobile parts, and medicines, pose significant risks to consumer health and safety. In addition, trade in counterfeit and pirated products often fuels cross-border organized criminal networks and hinders sustainable economic development in many countries.

Because fostering innovation and creativity is essential to U.S. prosperity, competitiveness, and the support of an estimated 40 million U.S. jobs that directly or indirectly rely on IPR-intensive industries, USTR works to protect American innovation and creativity with all the tools of U.S. trade policy, including through this Report.

Initiatives to Strengthen IPR Protection and Enforcement Internationally

Positive Developments

The United States welcomes the following important developments in 2014 and early 2015:

• High-level planning documents issued by the Government of China in 2014 and 2015 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 (R&D) efforts. China has also continued an ongoing overhaul of its intellectual property laws. The United States welcomes pro-innovation statements by China, and urges China to continue to engage with foreign governments and stakeholders and to ensure that legal and regulatory reforms adhere to these articulated principles.
• Administrative enforcement reforms in the Philippines have resulted in streamlined procedures, enhanced inter-agency cooperation, and more enforcement action, including increased seizures of pirated and counterfeit goods.
• On December 12, 2013, the Communications Regulatory Authority (AGCOM) in Italy adopted regulations to combat copyright piracy over the Internet. The regulations, which entered into force on March 31, 2014, 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. These websites have ceased operations in Italy, removed infringing content, or initiated cooperation with copyright holders. The adoption and effective ongoing enforcement of these regulations is a significant achievement, which the United States continues to welcome.
• The Ministry of Justice in Latvia, in close cooperation with other domestic agencies, has drafted new five-year guidelines regarding IPR protection. The guidelines 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. The guidelines, which were approved by the Cabinet of Ministers in March 2015, signal Latvia's commitment to pursuing innovation, encouraging economic growth, and creating jobs.
• 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. This type of creative inter-agency coordination on intellectual property issues bolsters the pool of resources available to consumers and small- and medium-sized businesses and supplements law enforcement resources.
• As of April 2015, there are 94 Parties to the World Intellectual Property Organization (WIPO) Performances and Phonograms Treaty (WPPT) and 93 Parties to the WIPO Copyright Treaty (WCT), collectively known as the WIPO Internet Treaties. Canada became a party to the WCT and WPPT on August 13, 2014 as did Madagascar, on February 24, 2015. During the past year, other trading partners have implemented key provisions of the WIPO Internet Treaties in their national laws.
• As of April 2015, there are 64 contracting parties to the Hague Agreement Concerning the International Registration of Industrial Designs. Korea, Japan, and the United States are the most recent to join the Agreement.

The United States will continue to work with its trading partners to further enhance IPR protection and enforcement during the coming year.

Best IPR Practices by Trading Partners

USTR highlights the following best practices by trading partners in the area of IPR protection and enforcement:

• USTR supports predictability, transparency, and meaningful engagement between governments and stakeholders in the development of laws, regulations, procedures, and other measures. Stakeholders report that such transparency and participation allow governments to avoid unintended consequences and facilitate stakeholder compliance with legislative and regulatory changes. In late 2014, India initiated a process of soliciting widespread stakeholder input regarding its development of a draft National IPR Policy. USTR encourages continued engagement with interested stakeholders as India continues to develop this policy framework. In contrast, Thailand's failure to address concerns identified by the United States, other foreign governments, and stakeholders has resulted in missed opportunities to address IPR challenges in recent amendments to Thailand's copyright law.
• Cooperation among government agencies is another example of a best practice. Several countries, including the United States, have introduced IPR enforcement coordination mechanisms or agreements to enhance inter-agency cooperation. The United States encourages other trading partners to consider adopting similar cooperative IPR arrangements. In Paraguay and the Philippines, commitment to a whole-of-government approach to IPR enforcement has been critical to enhancing the effectiveness of IPR enforcement and has resulted in positive reports from a number of affected stakeholder groups. In contrast, despite the commitment of individual government agencies and offices, lack of intra-governmental coordination has impeded actions to enforce IPR in Guatemala.
• Several trading partners have participated, or supported participation, in innovative mechanisms that enable government and private sector rights holders to donate or license pharmaceutical patents voluntarily and on mutually-agreed terms and conditions. In these arrangements, parties use existing patent rights to facilitate the diffusion of technology in support of public policy goals. The United States was the first government to share patents with the Medicines Patent Pool, an independent foundation hosted by the World Health Organization (WHO). The United States encourages additional public and private patent holders to explore voluntary licenses with the Medicines Patent Pool as one of many innovative ways to help improve the availability of medicines in developing countries. The patents that the United States shared were related to protease inhibitor medicines, primarily used to treat drug-resistant HIV infections. In addition, the United States, Brazil, and South Africa participate as providers in the WIPO Re:Search Consortium, a voluntary mechanism for making IPR and know-how available on mutually-agreed terms and conditions to the global health research community to find cures or treatments for neglected tropical diseases, malaria, and tuberculosis. Other countries participate as supporters. These arrangements have been used successfully to enhance access to medicines.
• Another best practice is the active participation of government officials in technical assistance and capacity building. As further explained in Annex 2, the United States encourages foreign governments to make training opportunities available to their officials and actively engages with trading partners in capacity building efforts both in the United States and abroad.

Multilateral and Plurilateral Initiatives

The United States works to promote adequate and effective IPR protection and enforcement through the following mechanisms:

• Trans-Pacific Partnership (TPP): Through the TPP, the United States is seeking to advance multifaceted U.S. trade and investment interests in the Asia-Pacific region. The TPP is an ambitious, 21^st-century regional trade negotiation involving Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and the United States. The TPP negotiations are being undertaken by this group of countries with the goal of creating a platform for integration of trade and investment frameworks across the Asia-Pacific region, and for addressing emerging IPR issues in the 21st century, including with respect to strong and balanced standards for the protection and enforcement of IPR.
• Transatlantic Trade and Investment Partnership (T-TIP): In 2013, the USTR notified the U.S. Congress of the President's intent to enter into negotiations for a comprehensive trade and investment agreement with the European Union (EU). Since that notification, the United States and the EU have held several rounds of negotiations, most recently in April 2015. The United States and the EU provide among the highest levels of IPR protection and enforcement in the world. In the T-TIP, the United States is pursuing a targeted approach on IPR that will reflect the shared U.S.-EU objective of high-level IPR protection and enforcement, and sustained and enhanced joint leadership on IPR issues. The United States will seek new opportunities to advance and defend the interests of U.S. creators, innovators, businesses, farmers, ranchers, and workers with respect to strong protection and effective enforcement of IPR, including the ability to compete in foreign markets.
• World Trade Organization (WTO): The multilateral structure of the WTO provides opportunities for USTR to lead engagement with trading partners on IPR issues, including through accession negotiations for prospective Members, the Council for Trade-Related Aspects of Intellectual Property Rights (TRIPS Council), and the Dispute Settlement Body. In the past year, the United States sponsored discussions in the TRIPS Council on the positive and mutually-reinforcing relationship between the protection and enforcement of IPR and innovation. For example, in February 2015, the United States co-sponsored an agenda item on the role of women in innovation. The United States joined the EU, Japan, Montenegro, Norway, and Turkey as proponents of this first-of-its-kind initiative in the TRIPS Council to recognize the accomplishments of women creators and innovators and to address the challenges they continue to confront. These countries, along with numerous others, exchanged best practices and policy experience in promoting women innovators. In its presentation, the United States highlighted the exemplary advances of American women in a variety of technology sectors, from medicine to computer science, advanced manufacturing, and education.
   

  In 2014, the United States also co-sponsored several related agenda items in the TRIPS Council. In October 2014, the United States, the EU, and Switzerland co-organized the first-ever WTO Innovation Fair, which featured innovators, universities, start-ups, incubators, and accelerators from both developing and developed countries around the globe. This event provided a precedent-setting opportunity for trade and IPR delegates to observe first-hand the critical incentives for innovation provided by the TRIPS Agreement and IPR protection generally. In tandem with the Innovation Fair, the United States co-sponsored a TRIPS Council agenda item on IPR awareness. Under this agenda item, the United States and other WTO countries shared information on how to raise awareness regarding the factors that promote innovation and those that hinder innovation. This information-sharing exercise was built on the premise that one country's experiences may provide useful guidance for another country's innovation objectives.

   

  In June 2014, the United States and Taiwan co-sponsored a TRIPS Council agenda item on IPR and innovation focused on innovation incubators. This discussion in the TRIPS Council stressed the importance of incubators, including their work with respect to IPR, as part of the enabling environment for innovation. WTO countries exchanged best practices and success stories regarding their national experiences with facilities and groups such as incubators and accelerators, which provide critical support to start-ups and other new innovative entities to assist in the early stages of development.

   
  In February 2014, the United States sponsored a TRIPS Council agenda item on university technology partnerships. Discussions focused on the extent to which universities around the world are engines for innovation and technology transfer. Numerous WTO Members underscored the critical role that IPR plays in helping to support the types of university technology partnerships that translate basic research into goods and services that benefit consumers and society at large.
• Anti-Counterfeiting Trade Agreement (ACTA): In October 2012, Japan became the first signatory to ACTA to deposit its instrument of acceptance. The ACTA effort, launched in October 2007, brought together a number of countries prepared to embrace strengthened IPR enforcement and cooperative enforcement practices. ACTA signatories are Australia, Canada, Japan, Mexico, Morocco, New Zealand, Singapore, South Korea, and the United States. The EU and 22 EU Member States also signed the Agreement in January 2012, although it was not approved by the European Parliament. For signatories, the next step towards bringing the ACTA into force is to deposit instruments of ratification, acceptance, or approval. The ACTA would enter into force for those signatories 30 days following the deposit of the sixth such instrument. The ACTA includes provisions that seek to deepen international cooperation and to promote strong enforcement practices and ultimately would help sustain American jobs in innovative and creative industries.

Regional and Bilateral Initiatives

The United States works with many trading partners to strengthen IPR protection and enforcement through the provisions of bilateral agreements, including trade agreements and bilateral memoranda of cooperation, and through regional initiatives.

The following are examples of bilateral coordination and cooperation:

• The U.S.-China Joint Commission on Commerce and Trade (JCCT) and the U.S.-China Strategic and Economic Dialogue (S&ED) are two very significant bilateral annual trade engagements through which the United States negotiates important intellectual property and innovation commitments with China.
• Trade and Investment Framework Agreements (TIFAs) between the United States and numerous trading partners around the world have facilitated discussions on enhancing IPR protection and enforcement. In 2014, TIFA meetings with Taiwan resulted in important commitments on IPR, although implementation of those commitments and improvements in other areas will be crucial.

The following are examples of regional coordination and cooperation:

• In February 2014, the Asia-Pacific Economic Cooperation (APEC) Intellectual Property Experts Group (IPEG) unanimously endorsed a U.S. proposal to enhance improved protection and enforcement of trade secrets. Pursuant to the proposal, participating APEC economies returned survey responses, information from which was presented in a report endorsed by the IPEG in early 2015. The United States will continue to lead this initiative toward the identification of best practices and trade secret protection in APEC economies, as well as other efforts, in the coming year.
• Under its practice of conducting trade preference program reviews, USTR, in coordination with other U.S. Government agencies, reviews IPR practices in connection with the implementation of Congressionally-authorized trade preference programs, such as the Generalized System of Preferences (GSP) program, and regional programs, including the African Growth and Opportunity Act (AGOA), Caribbean Basin Economic Recovery Act (CBERA), and Caribbean Basin Trade Partnership Act (CBTPA), and works with trading partners to address any policies and practices that may adversely affect their eligibility.

USTR, in coordination with other U.S. Government agencies, looks forward to continuing engagement with trading partners in bilateral, regional, plurilateral, and multilateral fora to improve the global IPR environment. In addition to the work described above, the United States anticipates engaging with its trading partners on IPR-related initiatives in multilateral and regional fora such as the G-8, WIPO, the Organization for Economic Cooperation and Development (OECD), and the World Customs Organization (WCO). In addition, U.S. Customs and Border Protection (CBP) is interested in exploring opportunities for tangible cooperation on improving IPR border enforcement. These opportunities could include sharing best practices and customs-to-customs information exchange for use in risk management and enforcement actions, and conducting joint customs enforcement operations designed to interdict shipments of IPR-infringing goods destined for the United States.

Trends in Trademark Counterfeiting and Copyright Piracy

The problems of trademark counterfeiting and copyright piracy continue on a global scale and involve the mass production and sale of a vast array of fake goods and a range of copyright-protected content pirated in various forms. Counterfeited goods include semiconductors and other electronics, chemicals, automotive and aircraft parts, medicines, food and beverages, household consumer products, personal care products, apparel and footwear, toys, and sporting goods.

Consumers, legitimate producers, and governments are harmed by trademark counterfeiting and copyright piracy. Consumers may be harmed by fraudulent and potentially dangerous counterfeit products, particularly medicines, automotive and airplane parts, and food and beverages that may not be subjected to the rigorous "good manufacturing practices" used for legitimate products. Producers and their employees face diminished revenue and investment incentives, an adverse employment impact, and loss of reputation when consumers purchase fake products. Governments may lose tax revenue and find it more difficult to attract investment because infringers generally do not pay taxes or appropriate duties, and often disregard product quality and performance.

An example which can serve to illustrate the extent of the economic harm arising from such trademark counterfeiting comes from India. In September 2013, the International Chamber of Commerce and the Federation of Indian Chambers of Commerce and Industry published a study which analyzed seven key industry sectors that are vulnerable to counterfeiting, piracy, and smuggling, e.g., automotive parts, alcohol, computer hardware, mobile phones, packaged foods, personal goods, and tobacco products. The study concluded that, in 2012, rights holders suffered a 21.7 percent, or an approximately $11.9 billion, loss in sales in India as a result of trademark counterfeiting issues. Collectively, according to the study, the Indian government's economic loss associated with these illicit activities totaled approximately $4.26 billion.

Industry reports the following trends in counterfeiting and piracy:

• Many countries provide penalties that fail to deter criminal enterprises engaged in global copyright piracy and trademark counterfeiting operations. Even when such enterprises are investigated and prosecuted, the penalties imposed on them in many countries are low, and therefore, rather than deter further infringements, such penalties only add to the cost of doing business.
• 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. Enforcement authorities, unfortunately, face difficulties in responding to this trend. Online advertisements for the sale of illicit physical goods are ubiquitous.
• 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. In 2014, Hong Kong Customs conducted a raid against a syndicate selling preloaded media boxes, arresting nine people and seizing 41 boxes, but greater action and coordination will be needed in this region.

The United States continues to urge trading partners to undertake more effective criminal and border enforcement against the manufacture, import, export, transit, and distribution of pirated and counterfeited goods. USTR engages with its trading partners through bilateral consultations, trade agreements, and international organizations to help ensure that penalties, such as significant monetary fines and meaningful sentences of imprisonment, are available and applied so as to have a deterrent effect on counterfeiting and piracy. In addition, trading partners should ensure that both counterfeit goods, as well as the materials and implements used for their production, are seized and destroyed, and thereby removed from the channels of commerce. Permitting counterfeit and pirated goods and enabling materials to reenter the channels of commerce after an enforcement action wastes resources and compromises the global enforcement effort. Trading partners should also provide enforcement officials with the authority to seize suspect goods and destroy counterfeit and pirated goods during import or export, or in transit movement, ex officio, without the need for a formal complaint from a rights holder. The U.S. Government coordinates with, and supports, trading partners through technical assistance and sharing of best practices on criminal and border enforcement, including with respect to the destruction of seized goods. (See Annex 2).

The manufacture and distribution of pharmaceutical products bearing counterfeit trademarks is a growing problem that has important consequences for consumer health and safety. Such trademark counterfeiting is a contributing dimension of the larger problem of the proliferation of substandard, unsafe medicines. The United States notes its particular concern with the proliferation of counterfeit pharmaceuticals that are manufactured, sold, and distributed in trading partners such as Brazil, China, India, Indonesia, Lebanon, Peru, and Russia. China and India are the sources of most of the counterfeit pharmaceuticals shipped to the United States. While it is impossible to determine an exact figure, studies have suggested that up to 20 percent of drugs sold in the Indian market are counterfeit and could represent a serious threat to patient health and safety. The U.S. Government, through the United States Agency for International Development (USAID) and other Federal agencies, supports programs in sub-Saharan Africa, Asia, and elsewhere that assist trading partners in protecting the public against counterfeit and also substandard medicines (medicines that do not conform to established quality standards) introduced into their markets. (See discussion immediately below).

In many cases, the bulk active pharmaceutical ingredients (API) that are used to manufacture pharmaceuticals bear counterfeit trademarks. Because such API are unlawfully produced or marketed, their manufacturers are unlikely to subject themselves to regulatory oversight or comply with good manufacturing practices. Hence, these products may contain substandard and potentially hazardous materials, and may threaten the health of American consumers. For instance, in China, some domestic chemical manufacturers that produce API have avoided regulatory oversight by failing to declare that the chemicals are intended for use in pharmaceutical products. This practice serves as a contributing factor to China's status as a major source country for harmful APIs used in counterfeit pharmaceutical products. In a welcome initial step to address this shared concern, in 2014, China committed to develop amendments which provide enhanced regulatory control over manufacturers of bulk chemicals that can be used as API.

Trademark Counterfeiting in Sub-Saharan Africa

This year USTR heard from several stakeholders that noted increasing concerns regarding the large number of counterfeit goods entering sub-Saharan Africa from China and other source countries. Key ports in Kenya, Nigeria, and South Africa serve as entry points for counterfeit goods into the continent's distribution channels. These counterfeit goods can endanger lives, displace legitimate products, and adversely affect opportunities for legitimate economic growth. Counterfeit goods flooding sub-Saharan Africa's markets include, but are not limited to, medicines, automotive parts, and electronics. Such products pose serious health and safety dangers to individuals and communities. The lack of resources and other challenges make enforcement particularly difficult in this region.

Kenya and Nigeria are the largest markets in East Africa and West Africa, respectively, and face many serious enforcement challenges resulting from this trend. In Kenya, despite a robust legal framework supporting IPR enforcement, agencies with a positive track record of effectiveness, such as the Kenyan Anti-Counterfeiting Agency and Kenyan Revenue Authority, have experienced significant resource cuts. Minimum penalties for IPR infringement, clear sentencing guidelines, and adequate staffing and resources are critical tools for Kenyan authorities to operate effectively. Nigeria has some of the largest and most notorious markets for counterfeit goods in Africa, including several in Lagos State. (See 2014 Notorious Markets List, available at www.ustr.gov).

The United States lauds measures previously taken against counterfeit products and those underway throughout sub-Saharan Africa against trade in such goods. The United States supports measures taken in the region to address these issues. However, it is imperative that source-country governments enhance their enforcement against such exports in support of sub-Saharan African governments, such as Kenya and Nigeria, that are working to combat this serious challenge.

Trademark Issues and Domain Name Disputes

Trademarks help consumers distinguish providers of products and services from each other and thereby serve a critical source identification role. The goodwill represented in a company's trademarks is often one of the company's most valuable business assets.

However, in numerous countries, legal and procedural obstacles exist to securing and enforcing trademark rights. For example, many countries need to establish or improve transparency and consistency in their administrative trademark registration procedures. For example, the lack of opposition procedures or effective implementation of such procedures in countries such as Mexico and Russia, deprives legitimate brand owners of a key tool to challenge bad-faith registrations.

Of additional concern is a report that significant punitive damages were imposed on the owner of a trademark registered in Panama in connection with that owner's efforts to oppose the registration and use of a second mark which has been found to be confusing similar in other markets. While the decision in this dispute is not necessarily representative of a systemic concern in Panama, the damage award may discourage other legitimate trademark owners from entering the market out of concern that defending their marks will result in punitive action.

Mandatory requirements to record trademark licenses are another concern, as they frequently impose unnecessary burdens, both administrative and financial, on trademark owners and create difficulty in the enforcement and maintenance of trademark rights. The absence of adequate means for searching for trademark applications and registrations, such as by electronic information systems like online databases, makes obtaining trademark protection more complicated and unpredictable. The ability to research proposed new trademarks and determine whether there are any conflicting trademarks filed or registered in other countries is critical for launching products in foreign markets.

Also, in a number of countries, governments often do not provide the full range of internationally-recognized trademark protections. For example, dozens of countries do not offer a certification mark system for use by foreign or domestic industries. The lack of a certification mark system can make it more difficult to secure protection for products with a quality or characteristic that consumers associate with the product's geographic origin. Robust protection for well-known marks is also important for many U.S. producers and traders who have built up the reputation of their brands.

Another area of concern for trademark holders is the lack of protection of their trademarks against unauthorized uses under country code top level domain names (ccTLDs). U.S. rights holders face significant trademark infringement and loss of valuable Internet traffic because of such uses, and it is important for countries to provide for appropriate remedies in their legal systems to address this issue. A related and growing concern is that ccTLDs lack transparent and predictable uniform domain name dispute resolution policies (UDRPs). Effective UDRPs should assist in the quick and efficient resolution of these disputes. The United States encourages its trading partners to provide procedures that allow for the protection of trademarks used in domain names and to ensure that dispute resolution procedures are available to prevent the misuse of trademarks.

Government Use of Licensed Software

Under Executive Order 13103 issued in September 1998, U.S. Government agencies maintain policies and procedures to ensure that they use only authorized business software. Pursuant to the same directive, USTR has undertaken an initiative to work with other governments, particularly in countries that are modernizing their software systems or where concerns have been raised, against unauthorized government use of software. Considerable progress has been made under this initiative, leading to numerous trading partners' mandating that only legitimate software be used by their government bodies. It is important for governments to legitimize their own activities in order to set an example for the public of respecting IPR. Further work on this issue remains with certain trading partners, such as Algeria, China, Costa Rica, Morocco, Pakistan, Paraguay, Tajikistan, Thailand, Ukraine, and Vietnam. The United States urges trading partners to adopt and implement effective and transparent procedures to ensure legitimate governmental use of software.

Digital Piracy, Piracy Online, and Broadcast Piracy

The increased availability of broadband Internet connections around the world, combined with increasingly accessible and sophisticated mobile technology, is generating significant benefits, ranging from economic activity based on new business models to greater access to information. However, these technological developments have also made the Internet an extremely efficient vehicle for disseminating infringing content, and for supplanting legitimate opportunities for copyright holders and online platforms that deliver licensed content. The U.S. Government's 2014 Notorious Markets List (available at www.ustr.gov) includes examples of online marketplaces reportedly engaging in commercial-scale IPR counterfeiting and piracy, including sites hosted in, or operated by, parties located in Brazil, Canada, China, Russia, Switzerland, Ukraine, and elsewhere.

While optical disc piracy continues in many countries, including in China, India, Paraguay, and Vietnam, piracy over the Internet has become the priority copyright enforcement issue in many trading partner markets. For example, the unauthorized retransmission of live sports programming over the Internet continues to grow in a number of countries and regions, particularly in China, and in Latin America, the Middle East, and the Caribbean region. Websites that link to infringing content are intensifying the problem. In addition, pirate servers or "grey shards" that allow users to play unauthorized versions of cloud-based entertainment software, and the development and online distribution of devices that allow for the circumvention of technological protection measures (TPMs), including "game copiers" and mod chips, allowing users to play pirated games on physical consoles, present unique enforcement challenges for rights holders.

"Camcorded" copies (i.e., unauthorized recordings made in movie theaters) of first-run motion pictures that are distributed worldwide via the Internet result in economic harm not only in the market where the film was originally shown, but in other markets as well. The availability of, and recourse by rights holders to, enforcement procedures and remedies is a critical component of the online ecosystem. However, governments must also play a role, particularly in situations of online piracy that implicate multiple jurisdictions. Governments should avoid creating a domestic environment that offers a safe haven for piracy on the Internet.

For example, the United States also is increasingly concerned with Switzerland's system of online copyright protection and enforcement. Several years have elapsed since the issuance of the judicial decision which gave rise to these concerns. Switzerland is reportedly attracting illicit sites formerly hosted in Eastern Europe, so the urgency for action by Swiss authorities has increased considerably. The United States strongly urges Switzerland to demonstrate its commitment to provide robust copyright protection and to combat online piracy by taking concrete steps to ensure that rights holders can protect their rights. The United States continues to welcome many aspects of the December 2013 report of the Arbeitsgruppe zum Urheberrecht (AGUR12 working group) on copyright, and continues to encourage the Swiss government to move forward expeditiously with measures that address copyright piracy in an appropriate and effective manner, including through administrative action and legislation. The United States looks forward to intensified engagement by, and cooperation with, Swiss authorities in their enhanced efforts with respect to this important issue.

The United States continues to work with other governments, in consultation with U.S. copyright industries and other affected sectors, to develop strategies to address global IPR issues. The United States encourages trading partners to adopt measures to address these challenges, including by implementing the WIPO Internet Treaties. These treaties, agreed in 1996 and which entered into force in 2002, have raised the standard of copyright protection around the world, particularly with regard to Internet-based delivery of copyrighted content. The treaties, which included certain exclusive rights, require signatories to provide adequate legal protection and effective legal remedies against the circumvention of certain technological measures as well as certain acts affecting rights management information. A growing number of trading partners are implementing the provisions of the WIPO Internet Treaties to create a legal environment conducive to investment and growth in legitimate Internet-related businesses, services, and technologies.

Copyright-Related Challenges in the Caribbean Region

The United States continues to express serious concerns regarding copyright protection and enforcement in the Caribbean region. (See Section II and the 2014 Special 301 Report for a more detailed discussion). The United States has raised these issues at meetings of the Caribbean Community and Common Market (CARICOM) in 2013 and 2014, and looks forward to continuing to engage on these challenges with CARICOM and its member governments, and with other trading partners whose markets present these challenges. The following is a summary of U.S. concerns in CARICOM (and associated) markets:

U.S. musical works are being publicly performed by radio and TV broadcasting stations without obtaining licenses from the appropriate public performances rights organizations (PROs). This problem has been reported again this year in Antigua and Barbuda, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, St. Lucia, and St. Vincent and the Grenadines. In some cases, the alleged infringing broadcaster is licensed by the government or is government-owned, which makes such actions even more troubling.

Cable operators and television and radio broadcasters, some government-owned (e.g., in Barbados), reportedly refuse to negotiate with the PROs for compensation for public performances of music. PROs also assert that they have struggled to advance their legal claims in the local courts and, even when successful, cannot obtain payments. These problems have been reported in Barbados, Jamaica, and Trinidad and Tobago as well as Antigua and Barbuda, Belize, Dominica, Grenada, Guyana, St. Lucia, and St. Vincent and the Grenadines.

With regard to cable and satellite broadcasting of copyrighted network programming, although Antigua and Barbuda, Barbados, Belize, Dominica, Grenada, Jamaica, St. Kitts and Nevis, Saint Lucia, and St. Vincent and the Grenadines currently maintain a statutory licensing regime that includes a requirement to pay royalties to rights holders, reportedly, royalties are not being paid. Other countries in the region, including Anguilla, the Cayman Islands, Dominica, Montserrat, and the Turks and Caicos Islands, do not maintain statutory licensing regimes and reportedly fail to intercede when unauthorized entities, many of them government-owned, intercept and retransmit copyrighted content without remuneration. Satellite signal theft remains a serious concern in these countries as well.

IPR Protection and Market Access Challenges Affecting Multiple Industry Sectors

Trade Secrets

This year's Report again reflects an increasingly urgent need for trading partners to effectively protect and enforce trade secrets. Trade secret theft, including industrial and economic espionage conducted by cyber means, appears to be escalating. Companies in a wide variety of industry sectors, including information and communication technologies, services, biopharmaceuticals, manufacturing, and environmental technologies, rely on the ability to protect and enforce their trade secrets and rights in other proprietary information. Indeed, trade secrets, such as business plans, internal market analysis, manufacturing methods, and recipes, are often among a company's core business assets; and a company's competitiveness may depend on its capacity to protect such assets.

If a company's trade secrets are stolen by a competitor or the agent of a competitor, it may be extremely difficult, if not impossible, to recoup past investments in R&D, and future innovation may be compromised. Moreover, trade secret theft threatens to diminish U.S. competitiveness around the globe, and puts American jobs at risk. The reach of trade secret theft into critical commercial and defense technologies poses threats to U.S. national security interests as well.

Various sources, including the Office of the National Counterintelligence Executive (ONCIX), have reported specific gaps in trade secret protection and enforcement, particularly in China. The ONCIX publication titled Foreign Spies Stealing U.S. Economic Secrets in Cyberspace, states that "Chinese actors are the world's most active and persistent perpetrators of economic espionage." Theft may arise in a variety of circumstances, including those involving departing employees taking portable storage devices containing trade secrets, failed joint ventures, cyber intrusion and hacking, and misuse of information submitted by trade secret owners to government entities for purposes of complying with regulatory obligations. In practice, effective remedies appear to be difficult to obtain in a number of countries, including in China. In addition, many countries do not provide criminal penalties for trade secret theft sufficient to deter such behavior.

Consequently, the United States uses all trade tools available to ensure that its trading partners provide robust protection for trade secrets and enforcement of trade secrets laws.

U.S. Government Strategy on Mitigating the Theft of U.S. Trade Secrets

On February 20, 2013, the U.S. Intellectual Property Enforcement Coordinator (IPEC) issued the Administration Strategy on Mitigating the Theft of U.S. Trade Secrets. The Strategy highlights U.S. efforts to combat the theft of trade secrets that could be used by foreign governments or companies to gain an unfair commercial and economic advantage by harming U.S. innovation and creativity, including:

• Focusing diplomatic efforts regarding trade secret protection in other countries, which include, among others, sustained and coordinated engagement with trading partners, the use of trade policy tools (including through the use of this Report), cooperation, and training;
• Promoting voluntary best practices by private industry to protect trade secrets, including best practices regarding information security, physical security, and human resources policies;
• Enhancing domestic law enforcement operations, especially through the activities of the Departments of Justice and Defense, Federal Bureau of Investigation, and National IPR Coordination Center; and
• Conducting public awareness campaigns and outreach to educate stakeholders regarding trade secret theft.

Trade secret theft can result in illegitimate technology transfer to foreign actors and can undermine U.S. competitive advantage.

Given the global nature of trade secret theft, action by our trading partners also is essential. On May 26, 2014, the European Council adopted its position on the draft Directive of the European Parliament and of the Council on the Protection of Undisclosed Know-How and Business Information (Trade Secrets) Against Their Unlawful Acquisition, Use and Disclosure, which was introduced by the European Commission on November 28, 2013. The draft Directive is now before the Legal Affairs (JURI) Committee of the European Parliament (document number 2013/0402(COD)). This Directive would harmonize civil trade secret law throughout the EU. The United States welcomes these important steps and looks forward to continued progress on this draft measure specifically, and on EU efforts to protect trade secrets from theft and misappropriation generally.

Localization, Indigenous Innovation, and Forced Technology Transfer

Rights holders operating in other countries may face a variety of government measures, policies, and practices that are touted as means to incentivize domestic "indigenous innovation," but that, in practice, often disadvantage foreign companies, including those holding IPR. Such initiatives serve as market access barriers, discouraging foreign investment and hurting local manufacturers, distributors, and retailers. Such government-imposed conditions or incentives may distort licensing and other private business arrangements, resulting in commercially suboptimal outcomes for the firms involved and for innovation, generally. Further, these measures discourage foreign investment in national economies, slowing the pace of innovation and economic progress. Government intervention in the commercial decisions that enterprises make regarding the ownership, development, registration, or licensing of IPR is not consistent with international practice, and may raise concerns regarding consistency with international obligations as well.

These government measures often have the effect of distorting trade by forcing U.S. companies to transfer their technology or other valuable commercial information to national entities. Examples of these policies, include, but are not limited to:

• Requiring the transfer of technology as a condition for obtaining regulatory approvals or otherwise securing access to a market, or for allowing a company to continue to do business in the market;
• Directing state-owned enterprises in innovative sectors to seek non-commercial terms from their foreign business partners, including with respect to the acquisition and use or licensing of IPR;
• Providing national firms with a competitive advantage by failing to effectively enforce IPR, including patents, trademarks, trade secrets, and copyrights, thereby allowing those firms to misappropriate or infringe U.S. companies' IPR;
• Failing to take meaningful measures to prevent or deter cyber intrusions and other unauthorized activities;
• Requiring use of, or providing preferences to, including with respect to government procurement, products or services that contain locally-developed or owned IPR or that are produced by local manufactures or service providers;
• Manipulating the standards development process to create unfair advantages for national firms, including with respect to the terms on which IPR is licensed; and
• Requiring the submission of excessive (and often unnecessary) confidential business information for regulatory approval purposes and failing to protect such information appropriately.

Some country-specific examples of these measures are identified in Section II. In China, market access, government procurement, and the receipt of certain preferences or benefits are conditioned on a firm's ability to demonstrate that certain IPR is developed in China or are owned by or licensed, in some cases exclusively, to a Chinese party. In India, in-country testing requirements and data- and server-localization requirements are frequently cited by U.S. industry as inhibiting market access and blunting innovation in the information and communications technology sector. In Indonesia, a foreign party's approval to market pharmaceuticals is conditioned on the transfer of technology to an Indonesian entity or partial manufacture in Indonesia. In Nigeria, the United States is concerned about a push toward localization aimed at protecting, favoring, or stimulating local companies at the expense of foreign exporters and investors. For example, some recent measures require the procurement and use of locally-produced hardware, software, and other technological products, including Subscriber Identity Module (SIM) cards, and require that all subscriber and consumer data be hosted locally.

The United States urges that, in formulating policies to promote innovation, trading partners, including India and China, take account of the increasingly cross-border nature of commercial R&D, and of the importance of voluntary and mutually agreed commercial partnerships.

Challenges Affecting the Copyright and the Information and Communications Technology Sectors

Leveraging the power of the Internet, U.S. stakeholders continue to develop innovative business models that deliver content and services directly to consumers and businesses, support innovative business processes, and allow businesses to collaborate via new and efficient mechanisms. Increasingly, however, trading partners are creating obstacles that threaten continued growth and innovation by U.S. and other participants in the global digital economy. Emerging market access barriers reported by IP-intensive industry stakeholders include: restrictions on cross-border data flows and storage; discriminatory practices in government procurement of Information and Communications Technology (ICT) products and services; local content quotas; obstacles to investment; and other restrictions. As trading partners look to increase their own participation in the growing digital economy, these barriers must be eliminated to support continued innovation and growth.

For example, in 2014 and early 2015, China issued several measures imposing certain trade-restrictive IPR, R&D, and encryption-related requirements on ICT products, services, and technologies used in certain sectors of China's economy. China subsequently suspended one of the measures, which appears to be a signal that China is reconsidering its approach to ICT regulations. The United States welcomes this suspension and calls on China to engage in close consultation with concerned foreign governments and industry.

Some public comments received in response to the 2015 Special 301 Federal Register notice also identified developments in several countries that may have created market uncertainties for both technology companies and online content providers. For example, laws have recently been enacted in some European countries that involve required remuneration or authorization for certain online activities relating to publishing excerpts from others' websites. The United States is closely monitoring these developments.

Market Access and Pharmaceutical and Medical Device Innovation

Among other mechanisms to support pharmaceutical and medical device innovation, USTR has sought to reduce market access barriers, including those that discriminate against U.S. companies, are not adequately transparent, or do not offer sufficient opportunity for meaningful stakeholder engagement, in order to facilitate both affordable health care today and the innovation that assures improved health care tomorrow. This year's Report highlights concerns regarding market access barriers affecting U.S. persons that rely on intellectual property protection, including the pharmaceutical and medical device industries, particularly in Algeria, India, and Indonesia.

Measures, including those that are discriminatory, nontransparent or otherwise trade-restrictive, have the potential to hinder market access in the pharmaceutical and medical device sector, and potentially result in higher healthcare costs. For example, taxes or tariffs may be levied – often in a non-transparent manner – on imported medicines, and the increased expense associated with those levies is then passed directly to healthcare institutions and patients. According to an October 2012 WTO report titled More Trade for Better Health? International Trade and Tariffs on Health Products, India maintains the highest tariffs on medicines, pharmaceutical inputs, and medical devices among the WTO members identified in the report. These tariffs, combined with domestic charges or measures, particularly those that lack transparency or opportunities for meaningful stakeholder engagement or that appear to exempt domestically-developed and -manufactured medicines, can hinder the Indian government's efforts to promote increased access to healthcare products.

Moreover, unreasonable regulatory approval delays and non-transparent reimbursement policies can impede a company's ability to exercise its rights, and thereby discourage the development and marketing of new drugs and other medical products. The criteria, rationale, and operation of such measures are often nontransparent or not fully disclosed to patients or to pharmaceutical and medical device companies seeking to market their products. USTR encourages trading partners to provide appropriate mechanisms for transparency, procedural and due process protections, and opportunities for public engagement in the context of their relevant health care systems.

U.S. industry has expressed concerns regarding the policies of several trading partners, including Algeria, Austria, Belgium, China, Colombia, Czech Republic, Ecuador, Hungary, Italy, Korea, Lithuania, New Zealand, Portugal, Romania, Spain, Taiwan, and Turkey, on issues related to pharmaceutical innovation and market access. Examples of these concerns include:

• In Algeria, a ban on a number of imported pharmaceutical products and medical devices in favor of local products is a trade matter of paramount concern in this market and is the primary reason why Algeria remains on the Priority Watch List. The United States urges Algeria to remove this market access barrier that is also reportedly adversely affecting access to legitimate medicines;
• With respect to Turkey, U.S. industry continues to express significant concerns regarding the lack of efficiency, transparency, and fairness in the pharmaceutical manufacturing inspection process;
• With respect to the EU, U.S. industry continues to identify a series of concerning measures in several Member States, including Austria, Belgium, Czech Republic, Finland, Hungary, Italy, Lithuania, Portugal, Romania, and Spain. Such measures raise concerns with respect to the transparency and the opportunity for meaningful stakeholder engagement in policies related to pricing and reimbursement, which reportedly create uncertainty and unpredictability that adversely impact market access and incentives for further innovation;
• In Colombia and Ecuador, proposals designed to enhance domestic manufacturing capacity for pharmaceuticals could adversely affect market entry and investment and, in effect, limit access by consumers to the latest generation of medicines. One of the Ecuadorian proposals appears to limit the use of trademarks on off-patent and other pharmaceutical products, which has the potential to adversely affect both generic and innovative manufacturers, and generate consumer confusion; and
• With respect to New Zealand, U.S. industry has expressed serious concerns about the policies and operation of New Zealand's Pharmaceutical Management Agency (PhARMAC), including, among other things, the lack of transparency, fairness, and predictability of the PhARMAC pricing and reimbursement regime, as well as the negative aspects of the overall climate for innovative medicines in New Zealand.

The United States seeks to establish, or continue, dialogues with trading partners to address these and other concerns and to encourage a common understanding on questions related to innovation in the pharmaceutical and medical device sectors. The United States also looks forward to continuing its engagement with our trading partners to promote fair and transparent policies in this sector.

The United States, like many countries, faces healthcare challenges, including with respect to aging populations and rising health care costs. The United States shares the objectives of continuing improvement in the health and quality of life of its citizens, and of delivering efficient, responsive, and cost-effective, high-quality health care to its population. The United States looks forward to engaging with its trading partners on the concerns noted above.

Geographical Indications

The United States is working intensively through bilateral and multilateral channels to advance U.S. market access interests and to ensure that the trade initiatives of other countries and regions, including with respect to geographical indication (GI) protection, do not undercut U.S. industries' market access. GIs typically include place names (or words associated with a place) and they identify products or services as having a particular quality, reputation, or other characteristic essentially attributable to the geographic origin of the product or service.

The United States is actively involved in promoting and protecting access to foreign markets for U.S. exporters whose products are identified by common names or generic terms, like parmesan and mozzarella for cheese. The United States is pursuing these objectives in international fora, including in APEC, WIPO, and the WTO as well as in bilateral agreements. The United States is also engaging bilaterally to address GI-related concerns, including with Canada, China, Costa Rica, El Salvador, the EU and its Member States, Jordan, Morocco, the Philippines, South Africa, and Vietnam, among others. U.S. goals in this regard include:

• Ensuring that the grants of GI protection does not violate prior rights (for example, in cases in which a U.S. company has a trademark that includes a place name);
• Ensuring that the grant of GI protection does not deprive interested parties of the ability to use generic or common terms, such as parmesan or mozzarella;
• Ensuring that interested persons have notice of, and opportunity to oppose or to seek cancellation of, any GI protection that is sought or granted;
• Ensuring that notices issued when granting a GI consisting of compound terms identify its generic components; and
• Opposing efforts to extend the protection given to GIs for wines and spirits to other products.

The United States is particularly concerned with the EU system of GI protection, both within the EU and as extended through its trade agreements. These concerns include the scope of protection provided to GIs, including in relation to trademarks and generic or common names, as well as with respect to the transparency and due process of the EU GI registration systems. These concerns have become increasingly pronounced in the context of EU trade agreements, where due process safeguards, such as GI opposition and cancellation, have been diminished.

Intellectual Property and the Environment

Strong IPR protection and enforcement are essential to promoting investment in innovation in the environmental sector. Such innovation not only promotes economic growth and supports jobs, but also is critical to responding to environmental challenges. IPR provides incentives for R&D in this important sector, including through university research. Conversely, inadequate IPR protection and enforcement in foreign markets discourages entry into technology transfer arrangements in those markets. This may hinder the realization of the technological advances needed to meet environmental challenges, including the mitigation of, and adaptation to, climate change.

Certain national policies and practices advanced domestically and in multilateral fora may have the unintended effect of undermining national and global efforts to address serious environmental challenges. For example, India's National Manufacturing Policy promotes the compulsory licensing of patented technologies as a means of effectuating technology transfer with respect to green technologies. India has pressed to multilateralize this approach through its proposals in the negotiations under the United Nations Framework Convention on Climate Change (UNFCCC). These actions will discourage, rather than promote, investment in and dissemination of green technologies, including those technologies that contribute to climate change adaptation and mitigation.

The United States continues to work to ensure robust IPR protection and enforcement, which gives inventors and creators the confidence to: engage in foreign direct investment, joint ventures, local partnerships, and licensing arrangements; collaborate with foreign counterparts; open research facilities in markets abroad; establish local operations and work with local manufacturers and suppliers; create jobs, including local worker training; and invest in infrastructure for the production, adoption, and delivery of green technology goods and services, without fear of misappropriation of their IPR. Strong IPR protection is, therefore, not only critical to the objective of addressing environmental challenges and developing a global response to climate change, but also to national economic growth. The United States promotes strong IPR protection and enforcement as an environmental as well as an economic imperative, providing critical development benefits for, in particular, developing and least-developed country (LDC) partners.

Intellectual Property and Health

Numerous comments in the 2015 Special 301 review process highlighted concerns arising at the intersection of IPR policy and health policy. IPR protection plays an important role in providing the incentives necessary for the development and marketing of new medicines. An effective, transparent, and predictable IPR system is necessary for both manufacturers of innovative medicines and manufacturers of generic medicines.

The 2001 WTO Doha Declaration on the TRIPS Agreement and Public Health recognized the gravity of the public health problems afflicting many developing and least-developed countries, especially those resulting from HIV/AIDS, tuberculosis, malaria, and other epidemics. As affirmed in the Doha Declaration on the TRIPS Agreement and Public Health, the United States respects a trading partner's right to protect public health and, in particular, to promote access to medicines for all. The United States also recognizes the role of IPR protection in the development of new medicines, while being mindful of the effect of IPR protection on prices. The assessments set forth in this Report are based on various critical factors, including, where relevant, the Doha Declaration on the TRIPS Agreement and Public Health.

The United States is firmly of the view that international obligations such as those in the TRIPS Agreement have sufficient flexibility to allow trading partners to address the serious public health problems that they may face. Consistent with this view, the United States respects its trading partners' rights to grant compulsory licenses in a manner consistent with the provisions of the TRIPS Agreement and the Doha Declaration on the TRIPS Agreement and Public Health, and encourages its trading partners to consider ways to address their public health challenges while also maintaining IPR systems that promote innovation.

The United States also strongly supports the WTO General Council Decision on the Implementation of Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health concluded in August 2003. Under this decision, WTO Members are permitted, in accordance with specified procedures, to issue compulsory licenses to export pharmaceutical products to countries that cannot produce drugs for themselves. The WTO General Council adopted a Decision in December 2005 that incorporated this solution into an amendment to the TRIPS Agreement, and the United States became the first WTO Member to formally accept this amendment. The United States encourages other WTO members to accept this amendment by the current deadline, December 31, 2015. If two-thirds of WTO members accept the amendment, it will go into effect for those Members. The August 2003 waiver will remain in place and be available until the amendment takes effect.

The United States Government works to ensure that the provisions of its bilateral and regional trade agreements, as well as U.S. engagement in international organizations, including the United Nations and related institutions such as WIPO and the WHO, are consistent with U.S. policies concerning IPR and health policy and do not impede its trading partners from taking measures necessary to protect public health. Accordingly, USTR will continue its close cooperation with relevant agencies to ensure that public health challenges are addressed and IPR protection and enforcement are supported as one of various mechanisms to promote research and innovation.

Implementation of the WTO TRIPS Agreement

The TRIPS Agreement, one of the most significant achievements of the Uruguay Round (1986-1994), requires all WTO Members to provide certain minimum standards of IPR protection and enforcement. The TRIPS Agreement is the first broadly-subscribed multilateral IPR agreement that is subject to mandatory dispute settlement provisions.

Developed country WTO Members were required to implement the TRIPS Agreement fully as of January 1, 1996. Developing country Members were given a transition period for many obligations until January 1, 2000, and in some cases, until January 1, 2005. Nevertheless, certain Members are still in the process of finalizing implementing legislation, and many are still engaged in establishing adequate and effective IPR enforcement mechanisms.

Recognizing the particular challenges faced by LDC WTO Members, the United States has worked closely with them and other WTO Members to extend the implementation date for these countries. For example, on June 11, 2013, the TRIPS Council reached consensus on a decision to again extend the transition period under Article 66.1 of the TRIPS Agreement for LDC WTO Members. Under this decision, LDC WTO Members are not required to apply the provisions of the TRIPS Agreement, other than Articles 3, 4, and 5 (provisions related to national treatment and most-favored nation treatment), until July 1, 2021, or until such a date on which they cease to be an LDC WTO Member, whichever date is earlier.

The United States participates actively in the WTO TRIPS Council's scheduled reviews of WTO Members' implementation of the TRIPS Agreement, and also uses the WTO's Trade Policy Review mechanism to pose questions and seek constructive engagement on issues related to TRIPS Agreement implementation.

WTO Dispute Settlement

The United States continues to monitor the resolution of disputes announced in previous Special 301 Reports. The most efficient and preferred manner of resolving concerns is through bilateral dialogue. Where these bilateral efforts are unsuccessful, the United States will use the WTO dispute settlement procedures, as appropriate.

In April 2007, the United States initiated dispute settlement procedures relating to deficiencies in China's legal regime for protecting and enforcing copyrights and trademarks on a wide range of products. In March 2009, the WTO Dispute Settlement Body (DSB) adopted a panel report that upheld two of the claims advanced by the United States, finding that: (1) China's denial of copyright protection to works that do not meet China's content review standards is impermissible under the TRIPS Agreement; and (2) China's customs rules cannot allow seized counterfeit goods to be publicly auctioned after only removing the spurious trademark. With respect to a third claim concerning China's thresholds for criminal prosecution and conviction of counterfeiting and piracy, while the United States prevailed on the interpretation of the important legal standards in Article 61 of the TRIPS Agreement, including the finding that criminal enforcement measures must reflect and respond to the realities of the commercial marketplace, the panel found that it needed additional evidence before it could uphold the overall U.S. claim that China's criminal thresholds are too high. On March 19, 2010, China announced that it had completed all the necessary domestic legislative procedures to implement the DSB recommendations and rulings. The United States continues to monitor China's implementation of the DSB recommendations and rulings in this dispute.

In addition, the United States requested WTO dispute settlement consultations with China concerning certain other Chinese measures affecting market access and distribution for imported publications, movies, and music, and audio-visual home entertainment products (e.g., DVDs and Blu-ray discs) (AVHE products). The U.S. claims challenged China's prohibition on foreign companies' importation of all products at issue; China's prohibitions and discriminatory requirements imposed on foreign distributors of publications, music, and AVHE products within China; and China's imposition of more burdensome requirements on the distribution of imported publications, movies, and music vis-à-vis their domestic counterparts. On January 19, 2010, the DSB adopted panel and Appellate Body reports that found in favor of the United States on the vast majority of its claims. China committed to bring all relevant measures into compliance with the DSB recommendations by March 19, 2011, and subsequently revised or revoked measures relating to publications, AVHE products, and music. China did not issue any measures relating to theatrical films, but instead proposed bilateral discussions. In February 2012, the United States and China reached an agreement on the terms of an MOU that provides significantly increased market access for imported films and significantly improved compensation for foreign film producers. The United States continues to review and monitor the steps that China has taken toward compliance in this matter.

Following the 1999 Special 301 review process, the United States initiated dispute settlement consultations concerning the EU regulation on food-related GIs, which appeared to discriminate against foreign products and persons, notably by requiring that EU trading partners adopt an "EU-style" system of GI protection, and appeared to provide insufficient protections to trademark owners. On April 20, 2005, the DSB adopted a panel report finding in favor of the United States that the EU GI regulation is inconsistent with the EU's obligations under the TRIPS Agreement and the General Agreement on Tariffs and Trade 1994. On March 31, 2006, the EU published a revised GI Regulation that is intended to comply with the DSB recommendations and rulings. There remain some concerns, however, with respect to this revised GI Regulation, which the United States has asked the EU to address. The United States intends to continue monitoring this situation. The United States is also working intensively bilaterally and in multilateral fora to advance U.S. market access interests, and to ensure that the trade initiatives of other countries, including with respect to GIs, do not undercut market access for U.S. companies.

The Interagency Trade Enforcement Center

In his State of the Union address on January 24, 2012, President Obama announced the creation of the Interagency Trade Enforcement Center (ITEC) to take a whole-of-government approach to monitoring and enforcing Americans' trade rights around the world. On February 28, 2012, the President issued an Executive Order that established ITEC. ITEC's role in coordinating international and domestic trade enforcement helps to ensure that America's trading partners abide by their obligations, including by maintaining open markets on a non-discriminatory basis, and by following rules-based procedures in a transparent way. ITEC leverages and mobilizes the Federal Government's resources and expertise to address unfair foreign trade practices and barriers, including those adversely affecting IPR. In particular, ITEC uses expertise from across the Federal Government to assist in asserting U.S. trade rights implicated by various international trade agreements.

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1. The terms "copyright piracy" and "trademark counterfeiting" may appear below also as "piracy" and "counterfeiting," respectively.