USTR - Special 301 Priority Watch List
Office of the United States Trade Representative

 

Special 301 Priority Watch List
05/03/2004

PRIORITY WATCH LIST

ARGENTINA

Protection of intellectual property in Argentina has not improved significantly, therefore Argentina will remain on the Priority Watch List. The Government of Argentina did amend its patent law to provide protection for products obtained from a process patent, implementing the May 2002 U.S.-Argentina agreement, and put in place fast-track procedures for patent applications. However, Argentina's overall copyright, patent, and data protection regimes do not appear to comply with its international obligations. Copyright piracy for all industry sectors remains at high levels including recordable CDs (CD-Rs) and other optical media, entertainment software, sound recordings, books, and films. Although the willingness of the Argentine Government to initiate some enforcement actions during 2003 was encouraging, enforcement against piracy and counterfeiting remains lax and ineffective. Enforcement of copyrights on recorded music, videos, books, and computer software remains inconsistent, and inadequate resources, border controls and slow court procedures have hampered the effectiveness of enforcement efforts. In addition, unauthorized use of protected seed varieties remains a problem. In April 2002, the United States and Argentina reached an agreement with respect to most claims in a WTO dispute brought by the United States concerning Argentina's implementation of its TRIPS patent obligations. The important issue of data protection remains unresolved. Argentina still does not provide protection for confidential data submitted by research-based pharmaceutical companies and does not have a linkage system between the health agency and patent office, which results in the continued approval of copy products. The United States urges Argentina to implement its TRIPS obligation to provide data protection and an effective linkage system to protect patented pharmaceutical products. USTR will continue to monitor Argentina's efforts to effectively address these concerns, as well as its compliance with the commitments made under the May 2002 agreement.

BAHAMAS

The United States remains concerned over the lack of progress made by the Government of the Commonwealth of the Bahamas in fulfilling its obligations to address serious copyright concerns under an agreement reached between our two countries in 2000. Problems persist in the area of copyright protection for U.S. cable programs and motion picture copyrighted works. In particular, the compulsory licensing plan contains provisions that allow Bahamian cable operators to retransmit any copyrighted-television programming, including for-pay programming, whether or not transmitted from the Bahamas or outside of the Bahamas, and whether or not encrypted. Furthermore, the remuneration system for copyrighted works under the compulsory licensing program remains inadequate and arbitrarily includes even lower, special rates for hotels and other commercial enterprises. We understand that draft legislation for amendments to correct deficiencies in the copyright law has passed in the Parliament's House of Assembly and is now in the Senate for consideration. The United States urges The Bahamas to work to fulfill its obligations under the agreement and promptly enact these necessary amendments to the copyright law. In addition, the United States continues to encourage U.S. cable operators and copyright holders to enter into negotiations with licensed Bahamian cable operators to provide for the legitimate cable transmission of copyrighted works in the Bahamas.

BRAZIL

Brazil continues to fall short in providing adequate and effective protection of IPR. Despite some positive developments, most notably with respect to the formation and activities of the Brazilian Congress' Chamber of Deputies' Commission of Parliamentary Inquiry on piracy and amendments to the criminal code, protection has not significantly improved. Brazil is one of the largest markets globally for legitimate copyrighted products, but also one of the world's largest pirate markets. Optical media piracy and Internet piracy are increasing. The U.S. copyright industry estimates that losses in Brazil are the largest in the hemisphere, with industry-estimated losses exceeding $785 million in 2003. Despite having adopted modern copyright legislation, Brazil has not undertaken adequate enforcement actions against piracy. Criminal enforcement has not been sufficient or effective in deterring piracy. Furthermore, although a substantial number of raids are conducted by Brazilian police, very few result in prosecutions and convictions. Ineffective border enforcement that fails to stop an influx of pirated goods continues to plague trademark and copyright owners. Brazil has not made significant progress processing the backlog of pending patent applications, which industry estimates to be at 47,000 and for which industry has already paid substantial upfront processing fees. Unauthorized copies of pharmaceutical products continue to receive sanitary registrations that rely on undisclosed tests and other confidential data, although no unauthorized copies have been marketed yet. We will continue to monitor Brazil's progress in these areas, including through the ongoing GSP review that was initiated by USTR in 2001.

EGYPT

Egypt was moved from the Priority Watch List to the Watch List in 2003, based in large part on the passage of a comprehensive new IPR law. The United States notes the Government of Egypt's passage of implementing regulations for three of the four chapters of the IPR law, and continuing efforts in enforcement. However, recent marketing approvals for locally produced copies of patented pharmaceutical products, as well as deficiencies in Egypt's copyright enforcement regime, judicial system and trademark enforcement necessitate the elevation of Egypt to the Priority Watch List. The United States is seriously concerned by the Egyptian Health Ministry's marketing approval of four copies of U.S. innovator drugs and approval of four additional applications to register and market innovator drugs on the basis of the U.S. firms' confidential test data. These approvals run counter to Egypt's own domestic laws and raise serious concerns about Egypt's commitment to protect confidential test data. Egypt's copyright enforcement remains weak with continued high losses to the book publishing industry, high corporate end-user piracy levels and lax enforcement against extensive commerce in pirated books, CDs, DVDs and VCDs.

Copyright enforcement is further impaired by the lack of implementing regulations for the copyright portion of Egypt's new IPR law, as well as a court system in which copyright cases continue to move slowly, collection of judgments is difficult and transparency is lacking. Companies continue to experience difficulties with Egypt's Trademark Law, which makes trademark enforcement very difficult. In addition, implementing regulations for the new IPR law's sections for patents, trademarks and botanical varieties do not appear to fully address the deficiencies and ambiguities in the law. Efforts by Egypt to address these problems and improve its IPR regime will continue to play an important role in the expansion of trade and investment ties with the United States.

EUROPEAN UNION

The European Union (EU) will remain on the Priority Watch List because it has not demonstrated any willingness to address certain IP-related concerns in a sufficient manner, despite encouragement by the United States including through the U.S.-EU Trans Atlantic Economic Partnership. 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 ("GI Regulation"), which governs the protection of geographical indications (GIs) for agricultural products and foodstuffs in the EU. The regulation appears to discriminate against non-EC nationals and products, thereby violating WTO obligations to provide national treatment and most-favored-nation treatment. Further, the GI Regulation appears to deny trademark rights to owners of registered trademarks, rights that the EC is obliged to provide under the TRIPS Agreement. Despite over four years of consultations since June 1999, we were unable to resolve this matter, and so, in August 2003, we requested the establishment of a WTO dispute settlement panel to review the consistency of the EC's GI Regulation with WTO rules. That proceeding is on-going. In addition, lack of full implementation of the EU Biotechnology Directive, which obligates EU Member States to reform national laws and practices to affirmatively provide patent protection for a broad range of biotechnology inventions, by several EU member states continues to be a concern.

INDIA

While India has improved its IPR regime, protection of intellectual property in some areas remains weak due to inadequate laws and ineffective enforcement. India's 2002 patent law amendments (which became effective in May 2003) exempt subject matter such as biotechnological inventions, methods for agriculture and horticulture, processes for the treatment of humans, animals, or plants, and substances prepared by chemical processes from patent protection. Under the TRIPS Agreement, India has until January 1, 2005 to provide product patent protection, including for pharmaceuticals and agricultural chemicals. While the United States is encouraged by the Indian Government's recent statements concerning implementation of data exclusivity regulations, India has yet to implement the TRIPS obligation to protect confidential test data submitted by innovative pharmaceutical companies for market approval. India's Copyright Act has three overly broad exceptions, which together weaken protection of software. India is also in the process of revising its copyright law to implement the WIPO Internet treaties; we expect India to fully implement its obligations in this regard. Protection of foreign trademarks remains difficult due to procedural barriers and delays. Trademark owners must prove they have used their mark to avoid a counterclaim for registration cancellation due to non-use. Such proof can be difficult, given India's policy of discouraging foreign trademark use. Companies denied the right to import and sell products in India often are unable to demonstrate use of registered trademarks through local sale.

Piracy of copyrighted materials (particularly software, films, popular fiction and certain textbooks) remains a problem for U.S. and Indian rightholders. India has not adopted an optical disc law to deal with optical media piracy. Cable television piracy continues to be a significant problem, with estimates of tens of thousands of illegal systems in operation. The United States also has serious concerns about high levels of counterfeiting, particularly for medicines and auto parts. India's criminal IPR enforcement regime remains weak, and India needs sustained, centralized, coordinated enforcement of intellectual property rights, especially trademarks and copyrights. Its court system is extremely slow, and there are only a few reported convictions for copyright infringements resulting from raids. Industry reports significant weaknesses in India's border protection against counterfeit and pirated goods. India also needs to address the high volume of exports of domestically produced counterfeit goods.

INDONESIA

Indonesia took steps in 2003 to strengthen its IPR regime, but progress, particularly in the area of enforcement against piracy and counterfeiting, has been inconsistent. Serious concerns remain over lack of enforcement; the production, distribution, and export of pirated optical media products; trademark infringement; and deficiencies in Indonesia's judicial system. Stern warnings of strong enforcement made by the Directorate General for IPR to mall owners in July 2003 led to a near-complete shutdown of pirate vendors for 30 days, demonstrating that effective enforcement can stop pirates. However, lack of follow-through resulted in a return to high levels of activity by retail pirate vendors. Indonesia carried out some raids against retail outlets for pirate optical media products in 2003, but enforcement and prosecution of IPR violations remained insufficient. Pirate optical media products, including CDs, VCDs, DVDs and CD-ROMs, still dominate Indonesia's market. At least 27 plants in Indonesia produce optical media products. With a total annual disc capacity of 108.5 million, domestic production of pirated products continues to increase. The pharmaceutical industry has estimated that counterfeit drugs account for 30-40 percent of Indonesia's market, and there are serious concerns about imports of pirated pharmaceuticals from other countries into Indonesia. A number of companies continue to report trademark counterfeiting and infringement involving a wide range of products, including IT products, clothing and soft drinks. In July 2003, Indonesia's new copyright law came into effect. This law, first adopted in July 2002, addresses some concerns about Indonesia's compliance with its TRIPS obligations. But Indonesia still needs effective optical disc regulations that include a strong licensing requirement, sentencing guidelines that provide a strong deterrent, and other improvements. The United States will continue to use our bilateral TIFA to work with Indonesia to take the additional measures necessary to implement the IPR Work Plan submitted by the United States in May 2002.

KOREA

Korea was elevated from the Special 301 Watch List to the Priority Watch List in January 2004 as the result of an out-of-cycle review conducted in late 2003. Korea has taken several positive steps over the last year, such as granting police authority to the Standing Inspection Team responsible for investigating software piracy; increasing efforts to report cases of infringement to U.S. right holders; and stepping up efforts to combat piracy on university campuses. In addition, the U.S. Government has been encouraged by the Korean Government's commitment to redraft regulations to clearly authorize the Korea Media Rating Board to identify and stop the fraudulent rating of videos, DVDs, and video games. Accordingly, we are optimistic that this legal loophole will be finally and permanently closed in the near future. The U.S. Government is also greatly encouraged by recent statements by President Roh recognizing the importance of protection of intellectual property and his instruction to the relevant ministries to devise ways to improve Korea's system of IPR enforcement. We hope that this new effort will produce tangible systemic improvements which will, in turn, reduce piracy in Korea.

Despite such progress, the U.S. Government remains seriously concerned that modern copyright protection continues to be lacking in important areas. Key among these is Korea's failure to adequately update its laws to protect sound recordings against digital piracy. Statements by the Korean Government indicating an unwillingness to provide national treatment to U.S. sound recording producers are also a source of concern, and further exacerbate this problem. As a result, online music piracy has continued to grow, causing serious economic damage to U.S. companies.

Other important flaws in Korea's legal regime for the protection of IPRs relate to temporary copies, technological protection measures, Internet Service Providers liability, reciprocity provisions regarding database protection, ex parte relief, the lack of full retroactive protection for pre-existing copyrighted works, and copyright term extension. In addition, serious concerns have arisen over continuing book piracy in universities, street vendor sales of illegally copied DVDs, counterfeiting of consumer products, protection of pharmaceutical patents, and lack of coordination between Korean health and IPR authorities on pharmaceutical marketing approvals. Addressing these issues will continue to be a priority in bilateral discussions, including the U.S.-Korea Quarterly Trade Meetings.

KUWAIT

Kuwait has been elevated to the Priority Watch List this year due to its failure to address serious and rampant copyright infringement and failure to amend its copyright law. Furthermore, Kuwait has failed to implement the 2002 work plan that outlined the steps it would take to increase IPR enforcement. In fact, in 2003, enforcement efforts remained insufficient and penalties for infringement remained inadequate to deter offenders. Kuwait continues to have the worst retail optical disc piracy rate in the region as well as problems with corporate end-user piracy, hard-disc loading piracy, and cable piracy. We urge Kuwait to improve the situation by making public declarations at the highest level that piracy in Kuwait will not be tolerated, increasing the frequency of raids on suspected infringers, prosecuting offenders and amending its copyright and other intellectual property law to correct its deficiencies. Kuwait Customs created a special IPR unit in April 2004 and began taking some enforcement actions. This is a positive sign but measures to combat infringement need to continue over the long term. We will continue to address these issues under the U.S.-Kuwait Trade and Investment Framework Agreement signed in February 2004.

LEBANON

We commend the Lebanese government for some recent steps that it has taken to begin to address longstanding IPR problems. These measures include a crackdown on illegal cable operators, a large-scale raid on pirated DVDs, movement toward full legalization of government software, and increased ex officio inspections along the borders. In addition, the Lebanese Government in April issued new requirements for registration of pharmaceutical products that, if implemented, should help prevent the registration of unauthorized copies of patented U.S. pharmaceuticals. It is too early, however, to evaluate the effectiveness of these measures. At the present time, Lebanon continues to face problems in providing adequate and effective protection of intellectual property rights. Problems persist with the widespread availability of pirated optical discs and rampant cable piracy. Registration of copycat pharmaceuticals has remained a serious issue, and ambiguous and unenforceable data exclusivity provisions remain causes for concern. Counterfeiting of trademarked goods including pharmaceutical products continues with little effort at deterrence. Furthermore, the judiciary remains slow and inefficient, and until recently there has been a general lack of sustained will in the government to improve IPR enforcement. Lebanon has also not yet joined the latest text of the Berne Convention or ratified the WIPO Copyright Treaty or the WIPO Performances and Phonograms Treaty. We urge the Lebanese Government to continue its efforts to address these problems and to ratify the WIPO Internet Treaties. The Lebanese Government's recent steps constitute its most serious efforts in some time to strengthen IPR protection. The United States will closely monitor these efforts in hopes that they will continue to the benefit of Lebanon's economy and our bilateral trade relationship.

PAKISTAN

Pakistan is one of the world's leading producers/exporters of pirated optical media of copyrighted sound recordings, motion pictures, business software, and published materials. In 2003, Pakistan remained the fourth largest source of counterfeit and piratical goods seized by the U.S. Customs and Border Protection. The vast majority of these goods were either apparel and pharmaceuticals with counterfeit trademarks or, optical media products. We recognize that Pakistan has taken some initial steps to address these problems, however, we are disappointed that Pakistan has taken minimal action to address these serious and long-standing concerns. The Government of Pakistan must conduct immediate, vigorous and sustained enforcement against the plants involved in piracy and counterfeiting. Additional concerns include lack of protection against the unfair commercial use of data submitted for marketing approval of pharmaceutical products, widespread trademark counterfeiting and copyright piracy beyond optical media (e.g., book piracy), and lax enforcement overall. The United States also remains concerned over a 2002 ordinance that seriously undermined improvements Pakistan made to its patent law in 2000. We do note that some positive developments were made in the past year including the issuance of new trademark regulations, Cabinet approval of legislation for creation of the Pakistan Intellectual Property Rights Organization (PIPRO) and formation of an IPR Advisory Group involving the private sector. However, despite these developments, the overall piracy and counterfeiting problems are worsening rather than improving. As a result, we are elevating Pakistan to the Priority Watch List. The United States urges Pakistan to intensify its IPR protection and enforcement efforts, including finding effective means to address the issues highlighted in the "IPR Roadmap" presented to Pakistan in July 2003. Further, we hope for expeditious passage by Parliament and the devotion of meaningful funding and resources for PIPRO. We will use the future Trade and Investment Framework Agreement discussions to continue pressing for improvements to address our IP-related concerns.


REPUBLIC OF THE PHILIPPINES

Serious concerns remain regarding the lack of consistent, effective, and sustained IPR protection in the Philippines. U.S. distributors report high levels of pirated optical discs of cinematographic and musical works, computer games, business software, as well as widespread unauthorized transmissions of motion pictures and other programming on cable television systems. Trademark infringement in a variety of product lines also is widespread, with counterfeit or pirated merchandise openly available in both legitimate and illegitimate venues. The levels of illegal production and consumption of optical media remain consistently high. Although the estimated domestic demand for optical media is about seven million discs annually, industry and enforcement sources believe that there are at least 20 illegal production lines in the Philippines producing more than 70 million illegal DVDs, VCDs and CD-ROMs per year. We remain concerned over the Philippine Government's failure to implement data protection measures for innovative pharmaceutical and agricultural chemical products, and copyright provisions consistent with its obligations under the WIPO treaties. Many enforcement agencies suffer from a lack of resources while IPR issues remain a relatively low priority. Enforcement efforts such as raids and seizures often have only a temporary effect due to ineffective post-raid enforcement. Counterfeit goods from China, Malaysia, Hong Kong, Taiwan, and Thailand continue to enter the Philippines in large quantities. In response, the Bureau of Customs created a permanent IPR unit in September 2003 to investigate all shipments of counterfeit and pirated goods. Domestic enforcement suffers from lack of training and interagency coordination, which hinder raids, and there is a growing backlog of cases in the judicial system. The signing of the Optical Media Law in 2004 was a welcome step toward better protection of IP, and is intended to regulate the import, export and production of optical discs, including the tools and materials involved in the replication of optical discs. Full implementation of this law, including prosecution of IPR violators, is critical. Implementing regulations and the transformation of the Videogram Regulatory Board into the Optical Media Board have yet to be completed and will be a key factor in the effectiveness of the new law. The United States appreciates the Government of Philippines' efforts to address these concerns, and will continue to use the bilateral TIFA to address specific elements included in the IPR Action Plan concerning judicial, legislative and enforcement issues.

RUSSIA

Certain aspects of Russia's IPR regime, including its copyright law and enforcement measures, are deficient and appear to be inconsistent with the 1992 U.S.-Russian Federation Trade Agreement (Bilateral Trade Agreement) and below the standards set in the TRIPS Agreement. While Russia recognizes that it must revise its IPR laws and enforcement measures to meet TRIPS requirements, key legislation is still pending. Russia has amended its laws on trademark, appellations of origins, patents, designs for integrated circuits, plant varieties, computer software, and databases. However, Russia's Copyright Law still does not provide protection for pre-existing works and sound recordings, although on April 21, 2004, the State Duma adopted, in a second reading, a set of amendments to the Russian Copyright Law that would, among other things, provide protection for pre-existing works and sound recordings. The Russian Government is working to enact amendments to its laws on protection of undisclosed information, in particular protection for undisclosed test data submitted to obtain marketing approval for pharmaceuticals and agricultural chemicals. Serious concerns also remain about Russia's reciprocity-based system for protection of geographical indications. Russia also needs to give its courts the authority in criminal cases to order forfeiture and destruction of machinery and materials used to make pirated and counterfeit products.

Border enforcement in Russia is particularly weak. Unauthorized production and export of pirated optical media products has become a significant problem, with the number and capacity of optical media facilities rising dramatically. U.S. industry believes that many of 32 optical disc facilities are producing illegal optical discs. Industry estimates losses of over $1 billion annually as a result of this illegal activity. In addition, trademark counterfeiting remains significant and widespread, resulting in substantial losses for U.S. industry. We urge Russia to take immediate and effective steps to shut down illegal optical media plants, strengthen border enforcement, combat piracy and counterfeiting, and address deficiencies in its IPR laws. We will continue to monitor Russia's progress in these areas, including through the ongoing GSP review that was initiated by USTR in 2001.

TAIWAN

Taiwan extended its 2002 "Action Year for IPR Protection" until 2005 and has moved to strengthen enforcement, particularly against pirated optical media. The United States commends the Taiwan authorities and in particular, its enforcement authorities, for increasing the frequency and effectiveness of raids against night markets and inspections of optical media factories, which have significantly reduced the number of pirated optical media products for retail sale. These are important and praiseworthy steps. However, the IP piracy community in Taiwan appears to have adjusted to increased pressure from authorities in ways that maintain business losses due to IPR infringement at unacceptably high levels. For example, production appears to be shifting from large optical media plants to small, custom optical media burning operations. There is evidence that infringers are using non-traditional retail channels, including catalogue sales to anonymous customers for home delivery and marketing pirated products over the Internet. Serious concerns also remain over counterfeiting and border enforcement. U.S. companies report that trade in counterfeit goods continues, including increased reports of counterfeit pharmaceutical products. The United States hopes that successful implementation of recently approved laws to increase penalties for the production and importation of counterfeit pharmaceuticals will lead to the elimination of this public health threat.

Taiwan needs to make the necessary changes to its relevant laws to prevent unfair commercial use of pharmaceutical and agricultural chemical test data and to strengthen its copyright law. Although Taiwan amended its copyright law in June 2003, several provisions remain deficient. As recently as February 2004, Taiwan's Intellectual Property Office promised to work with legislators to seek further improvements to the copyright law, but improvements have not been enacted. The United States appreciates the efforts and steps that Taiwan has taken to strengthen its IP situation, and will continue to work with Taiwan officials on legislation and to achieve measurably improved enforcement results; including, if necessary, through higher-level engagement between USTR and Taiwan authorities. USTR has decided to conduct an out-of-cycle review in the fall to evaluate Taiwan's progress in achieving these objectives.

TURKEY

Long-standing concerns over the lack protection for confidential test data were noted in the 2003 Special 301 Report. Unfortunately, Turkey has not implemented data exclusivity. The Turkish Government has indicated that it may soon announce implementation of this protection, however, actual implementation may be delayed - possibly until 2007. Under TRIPS, Turkey was obligated to have this protection in place as of 2000. Due to this continued and now possibly extended delay in implementation of data exclusivity, lack of interim protection for pharmaceuticals in the research and development "pipeline," and with other serious concerns outlined below, Turkey has been elevated to the Priority Watch List. With regard to piracy, book piracy is the chief problem in Turkey, while piracy of optical media, mainly in the form of "burned" CD-Rs, has proliferated. IPR enforcement is also impeded by the judicial system. Although Turkey's 2001 copyright law improved the legal regime by providing deterrent penalties for copyright infringement, the courts fail to impose deterrent penalties against pirates. Amendments to the law in early 2004 banned street sales and allow for ex officio enforcement actions, which should provide additional tools to the government, but also lowered criminal penalties. In addition, counterfeiting, especially in apparel and designer brands, continues with little deterrence by the court system. The United States urges the Government of Turkey to enact data exclusivity for pharmaceuticals immediately, and to take more aggressive domestic and border enforcement actions such as criminal convictions and deterrent penalties to decrease counterfeiting and piracy.

 
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