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Russia, 10 other countries make the annual USTR counterfeit ''watch list''

WASHINGTON, DC - 05/01/06 - Once again China has topped the US annual list of countries criticized for inadequate protection of copyrights, patents and other intellectual property rights (IPR), the Office of the US Trade Representative (USTR) reports.

Regarding China, the USTR appeared to move closer to filing what would be the first-ever challenge in the World Trade Organization (WTO) against intellectual piracy and counterfeiting.

"Faced with only limited progress by China in addressing certain deficiencies in IPR protection and enforcement, the United States will step up consideration of its WTO dispute settlement options," the USTR report said.

Russia also came in for strong criticism in the 2006 report on implementation of a US law called Special 301. 

Under this provision of the Trade Act of 1974, the USTR must designate each year priority foreign countries for investigation of IPR practices; ultimately, the US could impose retaliatory trade sanctions against countries that fail to resolve complaints.

The USTR estimates that 85% to 93% of all sales of copyrighted products sourced in China in 2005 were pirated, "indicating little to no improvement." 

Among products and industries showing evidence of IPR infringement were films, music and sound recordings, publishing, software, pharmaceuticals, chemicals, information technology, apparel, athletic footwear, textile fabrics and floor coverings, consumer goods, electrical equipment, automotive parts and industrial products, the USTR said.

"China does not provide American copyright materials, inventions, brands, and trade secrets the intellectual property protection and enforcement to which they are entitled," the report said.

On top of the existing heightened scrutiny USTR gives to China, the agency said, it will conduct a special review of IPR protection and enforcement at the provincial level.

The report identifies four "hot spots" in China for special attention - Guangdong province, Zhejiang province, Fujian province and the Chinese capital of Beijing.

According to the USTR, Guangdong - adjacent to Hong Kong - is the center of large-scale counterfeit and pirate manufacturing in China for goods ranging from low-cost household items to high-technology computer equipment.

US industry has called the Silk Street Market near the US Embassy in Beijing "perhaps the single biggest symbol of China's IP enforcement problems." 

The USTR said that shops in Beijing sell pirated CDs and DVDs with official permission and that markets reportedly sell infringing software loaded onto computers. 

The report blamed a number of Chinese practices for inadequate IPR enforcement, including poor coordination among government agencies, protectionism and corruption.

"Most of all, China suffers from chronic over-reliance on toothless administrative enforcement and underutilization of criminal remedies," the report said.  "China's own 2004 data showed that it channeled more than 99 percent of copyright and trademark cases into its administrative systems and turned less than one percent of cases over to the police."

Some IPR violations can even pose health and safety risks. 

The USTR expressed concern about the proliferation of counterfeit pharmaceutical manufacturing in China and Russia.

Russia, which is negotiating for WTO accession, was cited in the report for increasing optical disc pirate production, especially on government-owned property, and pirated music available for downloading from Russian Web sites.

The USTR said also that a proposed change in Russia's civil code for replacing existing IPR laws "raises questions about its compliance with international norms and the possible adverse effect it could have, if passed, on IPR protection and enforcement in Russia."

In addition to China and Russia, the USTR said it was giving the highest level of IPR scrutiny to 11 other countries placed on what it calls the priority watch list:  Argentina, Belize, Brazil, Egypt, India, Indonesia, Israel, Lebanon, Turkey, Ukraine, and Venezuela.

Another 34 trading partners were placed on what is called the watch list, for which USTR employs a slightly lower level of scrutiny.

Due to progress on IPR, Kuwait and Pakistan were moved down from the priority watch list to the watch list, as Ukraine and the Philippines were earlier in the year. 

Azerbaijan, Kazakhstan, Slovak Republic, and Uruguay were removed from the watch list, the USTR said.

The USTR, the report said, will perform what it calls out-of-cycle reviews for five countries that could result in changes in Special 301 status before the next full report a year from now - Canada, Chile, Indonesia, Latvia, and Saudi Arabia.

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