PRIORITY WATCH LIST

ARGENTINA

Although Argentina has made incremental progress in improving its intellectual property rights (IPR) regime, such as by enacting some measure of patent protection, much work still remains to be done. Significant barriers to the effective enforcement of intellectual property rights remain, including weak and inconsistently applied penalties for IPR violations. Pirated copies of copyrighted material and counterfeit brand-name goods are widely available. Illegal decoding, distribution, and resale of satellite signals continue unabated. The use of unlicensed software remains widespread in businesses and in some government entities. Industry estimates that copyright piracy resulted in losses of $256 million in 2001. The process of private civil enforcement against copyright infringement has improved, but criminal charges and convictions are rarely sought or obtained. Although there has been an increase in police raids and other enforcement actions, these actions usually do not result in prosecutions or in deterrent sentences if prosecution occurs.

Argentine pharmaceutical firms continue to produce and export unlicensed copies of patented products. Industry estimates that the lack of adequate patent protection results in annual losses of $750 million. In 1999, the U.S. initiated a WTO dispute settlement case against Argentina on exclusive marketing rights and confidential test data protection. The U.S. initiated a subsequent WTO case in 2000, which involved a number of other patent issues. Earlier this month, however, a partial settlement was reached on a number of these issues. In this settlement, Argentina agreed to clarify how certain aspects of its IPR system operate in a manner consistent with their TRIPS Agreement obligations. In addition, Argentina agreed to amend portions of its patent law that were inconsistent with TRIPS. Two important issues, including data protection, remain unresolved.

BRAZIL

Brazil is both one of the largest markets globally for legitimate copyrighted products, and one of the world's largest pirate markets. Losses suffered by the U.S. copyright industry are the largest in the hemisphere, with industry estimates exceeding $700 million in the past year. Piracy-driven losses suffered by the Brazilian music industry are particularly staggering. Despite having adopted modern copyright legislation that appears largely to be consistent with TRIPS, Brazil has taken no serious enforcement actions against increasing rates of piracy.

On the national level, Brazil established an Inter-Ministerial Committee (IMC) in March 2001 to combat piracy, and the income tax authority recently began the destruction of a large amount of seized pirated goods. The state of Sao Paolo created a new division within the civil police to deal specifically with piracy and related crimes. Although the United States is encouraged by these actions, Brazil still has not adopted an action plan against piracy, and no lasting improvement in the enforcement situation has occurred at the national level. In particular, the IMC has taken very little action on the anti-piracy front. Intermittent, localized antipiracy and anticounterfeiting campaigns are an inadequate substitute for a planned, systemic, and consistent approach to domestic and border enforcement activity and the application by the Brazilian legal system of deterrent penalties.

In the patent area, Brazil has made very minor progress under an April 1998 agreement with the U.S. to process the backlog of 15,000 pending patent applications for which it has already collected several million dollars in processing fees. In 2000, the U.S. initiated dispute settlement proceedings against Brazil on a "local working" requirement in the patent law. In June 2001, the United States and Brazil agreed to transfer their dispute to a Bilateral Consultative Mechanism created to address this and other concerns.

COLOMBIA

U.S. pharmaceutical firms are experiencing significant losses in the Colombian market due to inadequate protection of confidential test data and the unavailability of "second use" patents. Colombia is second only to Argentina among Latin American countries in the prevalence of pirated pharmaceuticals. The U.S. Government is disappointed in actions taken by Colombia, on its own and through the Andean Community, to weaken data protection and prohibit "second use" patents throughout the Andean Community.

There is also a need for stronger enforcement of copyright and trademark laws. Although pirated and counterfeit goods are occasionally seized by enforcement authorities, prosecutions rarely follow. Despite repeated requests by the U.S. Government, Colombia has been slow to shut down illegal cable television networks so that licensed ones can take their place. The U.S. Government urges Colombia to take action immediately to remedy the current IPR situation, particularly with regard to patent protection, both in its national legislation and within the Andean Community institutions.

DOMINICAN REPUBLIC

Over the past year, the Dominican Republic has taken some steps to strengthen its IPR regime. However, there are still significant areas of concern that need to be addressed. The industrial patent law appears to suffer from several significant shortcomings with respect to international standards, including in the area of data protection. The U.S. Government also is concerned that the implementing regulations could worsen some of the existing problems with the industrial property law.

On a positive note, the United States is encouraged by the efforts of the National Copyright Office to investigate and punish copyright piracy, and to educate the public and judiciary about the importance of compliance with and enforcement of, the copyright law. However, copyright and trademark owners, as well as patent holders, continue to have difficulty in enforcing their intellectual property rights. Current efforts to enforce the copyright law have not prevented the widespread sale of pirated materials. In addition, we are concerned about the recent apparent increase in television piracy. The U.S. Government looks forward to further consultations with the Dominican Republic on possible improvements in its intellectual property rights regime.

EGYPT

Despite significant ongoing U.S. Government technical IPR assistance, Egypt has not yet enacted modern intellectual property rights laws to comply with its international obligations. The United States is encouraged, however, by reports that such laws may be passed by the end of this spring. The United States continues to strongly urge Egypt to correct the reported deficiencies in the draft copyright and patent laws before these laws are enacted by the legislature. The United States remains concerned, in particular, about the possible insertion in the draft patent law of a previously rejected provision calling for health-related patents to be reviewed by the Ministry of Health, which would appear to contradict the TRIPS Agreement requirement to provide patent protection without discrimination as to field of technology. On a positive note, the U.S. Government welcomes improvements that have been made regarding protection of test data and exclusive marketing rights, which we hope will remain in the final bill. The United States is also heartened by the steps Egypt has taken to ensure the authorized use of legitimate business software by government entities. However, enforcement on the whole remains lax and copyright piracy remains unchecked. The U.S. Government is also seriously concerned about the continuing problem of granting false licenses to pirates by the Ministry of Culture, a practice that undermines copyright protection, in particular for entertainment software and music.

EUROPEAN UNION

At the conclusion of the 1999 Special 301 review, the United States initiated a WTO dispute settlement case against the EU, based on the apparent TRIPS deficiencies in EU Regulation 2081/92, which governs the protection of geographical indications (GIs) for agricultural products and foodstuffs in the EU. The Regulation appears to deny national treatment to foreign GIs. According to the plain language of the Regulation, only EU GIs may be protected. Foreign GIs cannot be registered in the EU, and thus are not eligible for protection. In addition, although the Regulation permits EU nationals to oppose or cancel GIs, non-EU nationals are prohibited from raising any objections. With respect to trademarks, the Regulation permits dilution and even cancellation of trademarks when a GI is created later in time. The United States requested consultations regarding this matter on June 1, 1999, and numerous consultations have been held since then. In March of this year, the EU produced proposed amendments to the Regulation. Although the proposal, as written, would address some of the deficiencies of the Regulation, it is lacking in several significant respects, including its treatment of foreign GIs. We are exploring the possibility of addressing these concerns in order to reach a satisfactory settlement with the EU. If a mutually agreeable solution can not be found, the United States may have no option but to continue to pursue resolution through WTO dispute settlement procedures.

HUNGARY

Hungary does not provide adequate protection for confidential test data submitted by pharmaceutical companies for marketing approval, which appears to violate its obligations under Article 39.3 of the TRIPS Agreement. While Hungary has repeatedly indicated that it disagrees with this interpretation of TRIPS, it intends to put very limited data exclusivity into place effective January 1, 2003, in order to comply with EU directives. U.S. pharmaceutical products remain vulnerable to exploitation by large and aggressive Hungarian pharmaceutical copiers. On other legislative matters, Hungary seems to have made substantial progress in bringing its copyright, patent, trademark, customs code, and criminal and civil codes into conformity with its IPR obligations under the TRIPS Agreement and under the U.S.-Hungary bilateral IPR agreement. Enforcement, however, remains problematic and piracy remains moderately high. The U.S. Government urges Hungarian prosecutors and judicial authorities to take a more proactive approach to the enforcement of intellectual property rights.

INDIA

India's patent system and protection of exclusive test data appear far from compliant with its obligations under the TRIPS Agreement. The term of protection for pharmaceutical process patents is only seven years. India fails to provide patent protection for pharmaceutical and agricultural chemical products and the compulsory licensing system seems overly broad. Also, pending legislation meant to rectify India's TRIPS deficiencies may fall short of that goal. To make matters worse, the inadequate patent protection currently available is difficult for innovators to obtain: India's patent office suffers from a backlog of 30,000 patent applications and a severe shortage of patent examiners. Moreover, India's overly-generous opposition procedures often allow competitors to delay patent issuance until the patent has expired, resulting in a de facto removal of patent protection. In addition, India's copyright law, which is generally consistent with international standards, was weakened by amendments enacted in 2000 that undermine protection for computer programs. Enforcement against piracy remains a growing concern for U.S. copyright industries, especially given that pirated imports are entering the market from Southeast Asia and that there is growing Internet piracy. We will continue to consult with the Indian Government to resolve outstanding TRIPS compliance concerns, but if these consultations do not prove constructive, we will consider all other options available, including WTO dispute settlement, to resolve these concerns.

INDONESIA

Indonesia demonstrated some improvements to its intellectual property rights regime in 2001. While Indonesia is responsive to private sector requests for enforcement assistance and welcomes input on draft legislation, overall enforcement of intellectual property rights, including that of trademarks, held by U.S. companies, remains weak. Industry reports a troubling increase in illegal production lines for optical media and pirated books far beyond Indonesia's domestic consumption capacity. Indonesia's judicial system continues to frustrate right-holders with years of delay and a pronounced lack of deterrent penalties. However, the U.S. Government is encouraged by several recent developments in Indonesia that may address some of the deficiencies listed in the action plan the United States provided Indonesia in January 2001. In particular, Indonesia prepared draft optical media regulations and established provisions for commercial courts throughout the country to process intellectual property rights cases within the country's district court system. The United States urges Indonesia to work with the U.S. Government to ensure that the draft regulations are adequate and effective prior to their enactment and to continue to develop specialized legal and judicial expertise for the prosecution of intellectual property rights violations. Rigorous enforcement in the near term of these regulations and of the copyright law against illegal optical disk producers is critical. The U.S. Government is providing an updated action plan to Indonesia that reflects these recent developments and further refines the specific benchmarks contained in the earlier action plan. The United States will conduct an Out-of-Cycle Review in the fall to assess progress toward achieving these benchmarks.

ISRAEL

The United States commends the notable progress Israel achieved in 2001 in copyright enforcement. In 2001 Israel significantly increased the budgetary, educational, police and judicial resources it devotes to such enforcement efforts, with extensive concrete results in terms of raids, abatement of illegal CD production, and a drop in the piracy level for U.S. repertoire. Knesset approval is expected soon for a copyright law that would increase penalties and expedite prosecution for copyright violations, a step which would be a highly positive development. However, Israel maintains its policy of allowing its generic pharmaceuticals to rely on the confidential test data of U.S. innovator firms to obtain marketing approval, a policy it contends is TRIPS-consistent. Moreover, the lack of a clear definition for end-user piracy of business software as a crime, court procedural delays, and inadequate compensatory and deterrent civil damages have weakened some of its enforcement efforts. An opinion by the Ministry of Justice concluding that payment for the broadcasting and public performance of U.S. sound recordings is no longer necessary remains a concern, and the U.S. Government continues to seek clarification regarding the bearing of this opinion on Israel's bilateral obligations to the United States. The U.S. Government urges the Knesset to act soon to pass the copyright law and looks forward to continued improvements in Israel's intellectual property regime, including sustained efforts to strengthen copyright enforcement, that can be reflected in the OCR to be conducted later this year.

LEBANON

The United States is concerned by Lebanon's severe copyright piracy problem and the lack of a comprehensive governmental commitment to eliminate piracy and foster legitimate business. Despite the passage of the copyright law, there has been virtually no action by Lebanon against piracy. In addition, pervasive cable piracy continues to devastate legitimate theatrical, video, and television service providers. End-user piracy of computer software is pervasive among large companies, banks, trading companies, and most government ministries. Also troubling is an overly broad software exception for certain educational uses in the new copyright law that seriously undermines the viability of this market for legitimate products. The U.S. Government is also concerned by the establishment of an optical media production facility in Lebanon, which has become an exporter of pirated product. The United States urges Lebanon to address its severe copyright protection problems.

PHILIPPINES

Significant problems remain in ensuring adequate and effective protection of intellectual property rights in the Philippines. Legislation to fully implement its TRIPS Agreement commitments has been slow to develop, and enforcement efforts have had little deterrent effect on the extraordinary level of copyright piracy. The United States, however, is encouraged by President Macapagal-Arroyo's strong commitment to tackling intellectual property rights issues, and the United States welcomes the Supreme Court's recent ruling affirmatively establishing the ability of the court to grant ex parte search warrants. The United States hopes this ruling initiates a trend to improve the quality of the Philippines IPR-related laws and regulations. However, there remain many obstacles to the effective enforcement of intellectual property rights in the Philippines, including the low number of raids, insufficiently trained prosecutors, and procedural and judicial delays. Meanwhile, optical disk piracy and trademark counterfeiting continues to increase dramatically. The U.S. Government urges the Philippines to redouble its enforcement efforts across the board and to enact strong IPR laws and regulations, including a strong law to regulate the production of optical disks. The U.S. Government will conduct an OCR later in the year in order to monitor the situation in the Philippines.

RUSSIA

As part of its efforts to join the WTO, Russia will need to bring its intellectual property rights regime into full compliance with the TRIPS Agreement by the date of accession. Certain provisions of the Russian Copyright Law and Russia's enforcement regime appear to be inconsistent with the TRIPS Agreement and the intellectual property rights provisions of the 1992 U.S.-Russian Federation Trade Agreement. Lack of an effective OD law, , enforcement against unauthorized production and export of CDs and CD-ROMs and concerns about protection for well-known marks are growing problems, and result in substantial losses to U.S. industry each year. The United States urges Russia to pass the IPR legislation pending before the Duma (except for Part IV of the Civil Code), to establish an effective optical media regime, and to increase enforcement efforts across the board for both copyrights and trademarks.

TAIWAN

During the past year, Taiwan passed a number of new laws meant to strengthen the protection of intellectual property rights and bring the economy into compliance with its obligations under the TRIPS Agreement. These include certain amendments to its patent and copyright laws as well as new legislation to license the production of optical media, although the U.S. Government was disappointed that the optical media legislation was weakened before passage. Despite these positive steps, the lax protection of IPR in Taiwan remains very serious. U.S. companies report significant problems in being able to protect and enforce their intellectual property rights. Taiwan is one of the largest sources of pirated optical media products in the world. Its copyright law needs strengthening in a number of areas to deal with growing piracy. Corporate end-user piracy remains at a high level. Taiwan also suffers from trademark counterfeiting, including that of pharmaceuticals. Taiwan has only begun to take the steps necessary to enforce these new laws, particularly the optical media management statute. Nonetheless, the United States remains encouraged by the passage of these laws and the important first steps that have been taken in terms of implementation. The United States will continue our dialogue with Taiwan on the protection and enforcement of intellectual property rights during the coming year to help improve the situation.

URUGUAY

Uruguay's efforts to reform its outdated copyright and patent laws have been dominated by slow and uneven progress, which has resulted in an intellectual property rights regime that does not appear to be in compliance with Uruguay's TRIPS obligations. Specifically, Uruguay needs to update its 1937 copyright law to clarify that software is protected as a literary work, among other deficiencies. Movement towards a comprehensive copyright law stalled in 2001, and the U.S. Government is concerned about a flawed, software-only bill, which is moving forward. The United States is heartened by the increase in raids and prosecutions against piracy since 2000. However, inadequate civil remedies and lax border enforcement have caused high piracy rates to persist, and have allowed Uruguay to become a major transshipment point for pirated products. The United States urges Uruguay to ratify the WIPO Internet Treaties, enact TRIPS and WIPO-compliant copyright legislation, and remedy provisions of its patent law that appear to violate its TRIPS obligations.