Intellectual Property
U.S. Efforts Have Contributed to Strengthened Laws Overseas, but Challenges Remain Gao ID: GAO-04-912 September 8, 2004Although the U.S. government provides broad protection for intellectual property, intellectual property protection in parts of the world is inadequate. As a result, U.S. goods are subject to piracy and counterfeiting in many countries. A number of U.S. agencies are engaged in efforts to improve protection of U.S. intellectual property abroad. This report describes U.S agencies' efforts, the mechanisms used to coordinate these efforts, and the impact of these efforts and the challenges they face.
U.S. agencies undertake policy initiatives, training and assistance activities, and law enforcement actions in an effort to improve protection of U.S. intellectual property abroad. Policy initiatives include assessing global intellectual property challenges and identifying countries with the most significant problems--an annual interagency process known as the "Special 301" review--and negotiating agreements that address intellectual property. In addition, many agencies engage in training and assistance activities, such as providing training for foreign officials. Finally, a small number of agencies carry out law enforcement actions, such as criminal investigations involving foreign parties and seizures of counterfeit merchandise. Agencies use several mechanisms to coordinate their efforts, although the mechanisms' usefulness varies. Formal interagency meetings--part of the U.S. government's annual Special 301 review--allow agencies to discuss intellectual property policy concerns and are seen by government and industry sources as rigorous and effective. In addition, a voluntary interagency training coordination group meets about once a month to discuss and coordinate training activities. However, the National Intellectual Property Law Enforcement Coordination Council, established to coordinate domestic and international intellectual property law enforcement, has struggled to find a clear mission, has undertaken few activities, and is generally viewed as having little impact. U.S. efforts have contributed to strengthened intellectual property legislation overseas, but enforcement in many countries remains weak. The Special 301 review is widely seen as effective, but the impact of actions such as diplomatic efforts and training activities can be hard to measure. U.S. industry has been supportive of U.S. actions. However, future U.S. efforts face significant challenges. For example, competing U.S. policy objectives take precedence over protecting intellectual property in certain regions. Further, other countries' domestic policy objectives can affect their "political will" to address U.S. concerns. Finally, many economic factors, as well as the involvement of organized crime, hinder U.S. and foreign governments' efforts to protect U.S. intellectual property abroad.
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Report to Congressional Requesters:
September 2004:
INTELLECTUAL PROPERTY:
U.S. Efforts Have Contributed to Strengthened Laws Overseas, but
Challenges Remain:
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-912]:
GAO Highlights:
Highlights of GAO-04-912, a report to congressional requesters
Why GAO Did This Study:
Although the U.S. government provides broad protection for intellectual property,
intellectual property protection in parts of the world is inadequate.
As a result, U.S. goods are subject to piracy and counterfeiting in
many countries. A number of U.S. agencies are engaged in efforts to
improve protection of U.S. intellectual property abroad. This report
describes U.S agencies‘ efforts, the mechanisms used to coordinate
these efforts, and the impact of these efforts and the challenges they
face.
What GAO Found:
U.S. agencies undertake policy initiatives, training and assistance
activities, and law enforcement actions in an effort to improve
protection of U.S. intellectual property abroad. Policy initiatives
include assessing global intellectual property challenges and
identifying countries with the most significant problems”an annual
interagency process known as the ’Special 301“ review”and negotiating
agreements that address intellectual property. In addition, many
agencies engage in training and assistance activities, such as
providing training for foreign officials. Finally, a small number of
agencies carry out law enforcement actions, such as criminal
investigations involving foreign parties and seizures of counterfeit
merchandise.
Agencies use several mechanisms to coordinate their efforts, although
the mechanisms‘ usefulness varies. Formal interagency meetings”part of
the U.S. government‘s annual Special 301 review”allow agencies to
discuss intellectual property policy concerns and are seen by
government and industry sources as rigorous and effective. In
addition, a voluntary interagency training coordination group meets
about once a month to discuss and coordinate training activities.
However, the National Intellectual Property Law Enforcement
Coordination Council, established to coordinate domestic and
international intellectual property law enforcement, has struggled to
find a clear mission, has undertaken few activities, and is generally
viewed as having little impact.
U.S. efforts have contributed to strengthened intellectual property
legislation overseas, but enforcement in many countries remains weak.
The Special 301 review is widely seen as effective, but the impact of
actions such as diplomatic efforts and training activities can be hard
to measure. U.S. industry has been supportive of U.S. actions.
However, future U.S. efforts face significant challenges. For example,
competing U.S. policy objectives take precedence over protecting
intellectual property in certain regions. Further, other countries‘
domestic policy objectives can affect their ’political will“ to
address U.S. concerns. Finally, many economic factors, as well as the
involvement of organized crime, hinder U.S. and foreign governments‘
efforts to protect U.S. intellectual property abroad.
What GAO Recommends:
GAO is not recommending executive action. However, the Congress may
wish to review the National Intellectual Property Law Enforcement
Coordination Council‘s authority, operating structure, membership, and
mission.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
U.S. Agencies Undertake Three Types of IPR Efforts:
U.S. Efforts Have Contributed to Improved Foreign IPR Laws, but
Enforcement Overseas Remains Weak; Industry Supports U.S. Efforts:
Several Mechanisms Coordinate IPR Efforts, but Their Usefulness Varies:
U.S. Government Faces Challenges to Further Progress:
Conclusions:
Matter for Congressional Consideration:
Agency Comments:
Appendixes:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Trade Agreements Negotiated Since 1990 That Address IPR,
and the WTO Membership Status for Countries Involved:
Appendix III: WTO TRIPS Dispute Settlement Cases Brought by the U.S.
Government:
Appendix IV: Country Case Study: Brazil:
Appendix V: Country Case Study: China:
Appendix VI: Country Case Study: Russia:
Appendix VII: Country Case Study: Ukraine:
Appendix VIII: Comments from the Department of Commerce:
GAO's Comments:
Appendix IX: Comments from the Department of Homeland Security:
GAO's Comments:
Appendix X: Comments from the U.S. Agency for International
Development:
GAO's Comments:
Appendix XI: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Acknowledgments:
Table:
Table 1: Countries Designated as Priority Foreign Countries (PFCs) or
Named to the Priority Watch List Five or More Times during 1994-2004
Special 301 Reviews:
Figures:
Figure 1: Pirated DVDs from Brazil, China, and Ukraine:
Figure 2: U.S. Agency Participation in Coordination Mechanisms:
Figure 3: Counterfeit and Legitimate Chinese Pharmaceutical Products:
Figure 4: Counterfeit and Legitimate Russian Detergent:
Abbreviations:
AGOA: African Growth and Opportunity Act:
ATPA: Andean Trade Preference Act:
CBI: Caribbean Basin Initiative:
CD: compact disc:
DHS: Department of Homeland Security:
DVD: digital video disc:
FTA: free trade agreement:
FBI: Federal Bureau of Investigation:
GSP: Generalized System of Preferences:
IPR: intellectual property rights:
ITAC: Industry Trade Advisory Committee:
MLAT: mutual legal assistance treaty:
NIPLECC: National Intellectual Property Law Enforcement Coordination
Council:
PFC: priority foreign country:
TPRG: Trade Policy Review Group:
TPSC: Trade Policy Staff Committee:
TRIPS: Agreement on Trade-Related Aspects of Intellectual Property:
USAID: U.S. Agency for International Development:
USITC: U.S. International Trade Commission:
USPTO: U.S. Patent and Trademark Office:
USTR: Office of the U.S. Trade Representative:
WCO: World Customs Organization:
WIPO: World Intellectual Property Organization:
WTO: World Trade Organization:
Letter September 8, 2004:
The Honorable Tom Davis:
Chairman:
Committee on Government Reform:
House of Representatives:
The Honorable Donald Manzullo:
Chairman:
Committee on Small Business:
House of Representatives:
The Honorable Henry J. Hyde:
Chairman:
Committee on International Relations:
House of Representatives:
The United States dominates the creation and export of intellectual
property--creations of the mind.[Footnote 1] The U.S. government
provides broad protection for intellectual property through means such
as copyrights, patents, and trademarks. However, protection of
intellectual property in many parts of the world is inadequate, and as
a result, U.S. goods are subject to substantial counterfeiting and
piracy in many countries. A recent report by the Office of the U.S.
Trade Representative (USTR) on the state of intellectual property
protection in foreign countries concluded that counterfeiting has
become a massive, sophisticated global business involving the
manufacture and sale of counterfeit versions of everything from
shampoos, razors, and batteries to cigarettes, alcoholic beverages, and
automobile parts, as well as medicine and health care products. The
report also gave special attention to the growing problem of piracy of
optical media goods (e.g., CDs, DVDs).
Numerous U.S. agencies are addressing such problems by seeking better
intellectual property protection overseas. To understand more fully how
U.S. agencies have performed in this regard, you asked us to identify
and review their activities. This report addresses (1) the specific
efforts that U.S. agencies have undertaken to pursue improved
intellectual property protection in other nations; (2) the impact, and
industry views, of these efforts; (3) the means used to coordinate
these efforts; and (4) the challenges that these efforts face in
generating their intended impact.
To answer these questions, we analyzed key U.S. government intellectual
property reports and reviewed information from databases such as the
State Department's intellectual property training database and the
Department of Homeland Security's online database of intellectual
property goods seized. We found some limitations in these databases,
though the data were sufficiently reliable to provide broad
information. Further, despite our request, we were unable to obtain
complete data on use of a prominent trade preference program. We met
with officials from the Departments of State, Commerce, Justice, and
Homeland Security as well as USTR, the U.S. Patent and Trademark Office
(USPTO), the Library of Congress's Copyright Office (a legislative
branch office), the Federal Bureau of Investigation (FBI), the U.S.
Agency for International Development (USAID), and the U.S.
International Trade Commission (USITC). We also met with officials from
key intellectual property industry groups and reviewed reports they had
prepared. In addition, we attended a private-sector intellectual
property rights enforcement conference and a U.S. government training
session. We reviewed economic models used to estimate trade damages due
to intellectual property losses in Ukraine, which has been subject to
U.S. trade sanctions since 2002. We also traveled to four countries
where serious problems regarding the protection of intellectual
property have been reported--Brazil, China, Russia, and Ukraine--and
the U.S. government is taking measures to address these problems. (See
app. IV-VII for detailed information on these countries.) We met with
U.S. embassy and foreign government officials as well as
representatives of U.S. companies and industry groups operating in
those countries. We collected and reviewed U.S. government and industry
documents in all four nations. We conducted our work from June 2003
through July 2004, in accordance with generally accepted government
auditing standards. (See app. I for more detailed information on our
scope and methodology.)
Results in Brief:
U.S. agencies' efforts to improve protection of U.S. intellectual
property in foreign nations fall into three categories--policy
initiatives, training and assistance activities, and law enforcement
actions. USTR leads U.S. policy initiatives with an annual assessment
known as the "Special 301" review, which results in an annual report
detailing global intellectual property challenges and identifying
countries with the most significant problems. This report involves
input from many U.S. agencies and industry. Other policy initiatives
include requiring adequate intellectual property protection as part of
trade preference programs and negotiating agreements that address
intellectual property. In addition to conducting policy initiatives,
most agencies involved in intellectual property issues overseas also
engage in training and assistance activities. For example, USPTO and
the Department of Justice, among others, provide overseas and U.S.-
based training for foreign officials on matters related to intellectual
property enforcement. Further, although counterterrorism is the
overriding U.S. law enforcement concern, U.S. agencies such as the
Departments of Justice and Homeland Security conduct law enforcement
activities regarding intellectual property rights (IPR). These efforts
include investigations involving foreign parties, seizures of
counterfeit merchandise exported from other countries, and prosecutions
of individuals involved in pirating protected merchandise.
U.S. efforts have contributed to strengthened foreign IPR laws and
international IPR obligations, and, while enforcement overseas remains
weak, U.S. industry groups are generally supportive of U.S. efforts.
These efforts are viewed as aggressive, and the Special 301 review has
been cited repeatedly by government and industry sources as a useful
tool in encouraging improvements. However, the precise impact of many
specific U.S. government activities, such as diplomatic efforts and
training activities, can be difficult to measure. Further, enforcement
of intellectual property rights in many countries remains weak, despite
U.S. efforts. Nonetheless, U.S. industries recognize the many actions
taken by the U.S. government, and industry groups that we contacted
both in the United States and overseas were generally supportive of the
efforts of U.S. agencies to pursue improved intellectual property
protection overseas.
Several mechanisms exist to coordinate U.S. agencies' efforts to
protect U.S. intellectual property overseas, although the level of
activity and usefulness of these mechanisms vary. For example, on the
policy side, formal interagency meetings are required each year as part
of the U.S. government's annual Special 301 review. This active process
allows numerous agencies to share their views on global intellectual
property problems, incorporate industry input, consider other policy
considerations, and reach consensus regarding which countries should be
publicly cited as having IPR problems. Government and industry sources
view this effort as effective and thorough. In addition, an interagency
training coordination group with broad public and private sector
representation meets approximately once per month to discuss and
coordinate public and private sector training activities. According to
several private sector and agency officials who participate, the group
has increased information sharing and provides a forum for
coordination. Conversely, the National Intellectual Property Law
Enforcement Coordination Council (NIPLECC),[Footnote 2] which was
established to coordinate domestic and international intellectual
property law enforcement among U.S. federal and foreign entities, has
struggled to find a clear mission, has undertaken few activities, and
is perceived by private sector and some U.S. agency officials as having
little impact. Apart from these formal coordination bodies, regular,
informal communication and coordination regarding IPR-related overseas
activities occurs among agencies in the United States and in overseas
embassies. Numerous policy agency officials emphasized to us that this
type of informal interaction, particularly among interagency staff in
Washington, D.C., is central to pursuing U.S. intellectual property
goals overseas. Coordination between policy and law enforcement
agencies is less systematic.
U.S. efforts to improve intellectual property protection overseas face
challenges. Competing U.S. policy objectives may take priority over
protecting intellectual property in certain countries. In addition, the
impact of U.S. activities overseas is affected by countries' domestic
policy objectives and economic interests, which may complement or
conflict with U.S. objectives. U.S. efforts are more likely to achieve
their intended impacts if intellectual property protection has domestic
support in foreign countries, and, conversely, U.S. efforts are less
likely to be effective absent such support. Although U.S. policies can
affect a country's incentives with mechanisms such as trade preference
programs or trade sanctions, such tools may be insufficient to overcome
existing priorities in foreign countries. In addition, many economic
factors, as well as the involvement of organized crime, pose additional
challenges to U.S. and foreign governments' efforts, even in countries
where the political will for protecting intellectual property exists.
These economic factors include low barriers to entering into the
production of counterfeit or pirated goods, potential high profits for
producers of such goods, and large price differentials between
legitimate and fake products for consumers. The optical media sector
has been subject to these factors, which have been further exacerbated
by recent technological advances that allow for high-quality mass
production and mobile operations.
In this report, we suggest that the Congress review the National
Intellectual Property Law Enforcement Coordination Council's
authority, operating structure, membership, and mission.
We provided a draft of this report to the Departments of State,
Commerce, Justice, Homeland Security and to USTR, USPTO, the Copyright
Office, the FBI, USAID, and USITC. We received technical comments from
the Departments of State, Justice, and Homeland Security, USTR, the
Copyright Office, and USITC. We incorporated these comments into the
report as appropriate. We also received formal comment letters from the
Department of Commerce (which includes comments from USPTO), the
Department of Homeland Security, and USAID. Reproductions of these
letters, as well as our responses to the letters, can be found in app.
VIII-X. USAID raised concerns regarding our findings on the agency's
contribution to an online IPR training database. No agency disagreed
with our overall findings and conclusions, though all suggested several
wording changes and/or additions to improve the report's completeness
and accuracy. The FBI provided no comments on the draft report.
Background:
Intellectual property is a category of intangible rights that protect
commercially valuable products of the human intellect, such as
inventions; literary and artistic works; and symbols, names, images,
and designs used in commerce. U.S. protection of intellectual property
has a long history: Article 1 of the U.S. Constitution grants the
Congress the power "to promote the Progress of Science and useful Arts,
by securing for limited Times to Authors and Inventors the exclusive
Right to their respective Writings and Discoveries." Copyrights,
patents, and trademarks are the most common forms of protective rights
for intellectual property.[Footnote 3] Protection is granted by
guaranteeing proprietors limited exclusive rights to whatever economic
reward the market may provide for their creations and products.
Ensuring the protection of IPR encourages the introduction of
innovative products and creative works to the public.
Intellectual property is an important component of the U.S. economy,
and the United States is an acknowledged global leader in the creation
of intellectual property. According to USTR, "Americans are the world's
leading innovators, and our ideas and intellectual property are a key
ingredient to our competitiveness and prosperity." However, industries
estimate annual losses stemming from violations of intellectual
property rights overseas are substantial.[Footnote 4] Further,
counterfeiting of products such as pharmaceuticals and food items fuels
public health and safety concerns.[Footnote 5] USTR's Special 301
annual reports on the adequacy and effectiveness of intellectual
property protection around the world demonstrate that, from a U.S.
perspective, intellectual property protection is weak in developed as
well as developing countries and that the willingness of countries to
address intellectual property issues varies greatly. U.S. laws have
been passed that address the need for strong intellectual property
protection overseas and provide remedies to be applied against
countries that do not provide adequate or effective protection. For
example, the Omnibus Trade and Competitiveness Act of 1988 allows the
U.S. government to impose trade sanctions against such countries.
Eight federal agencies, the FBI, and the USPTO undertake the primary
U.S. government activities to protect and enforce U.S. intellectual
property rights overseas. These agencies are the Departments of
Commerce, State, Justice, and Homeland Security; USTR; the Copyright
Office; USAID; and USITC.[Footnote 6] The U.S. government also
participates in international organizations that address intellectual
property issues, such as the World Trade Organization (WTO), the World
Intellectual Property Organization (WIPO), and the World Customs
Organization (WCO).
U.S. Agencies Undertake Three Types of IPR Efforts:
The efforts of multiple U.S. agencies to protect U.S. intellectual
property overseas fall into three general categories--policy
initiatives, training and technical assistance, and U.S. law
enforcement actions. USTR leads most U.S. policy activities, in
particular the Special 301 review of intellectual property protection
abroad. Most agencies involved in efforts to protect U.S. IPR overseas
conduct training and technical assistance activities. However, the
number of agencies involved in U.S. law enforcement actions is more
limited, and the nature of these activities differs from other U.S.
government actions related to intellectual property protection.
USTR Leads Policy Efforts:
U.S. policy initiatives to increase intellectual property protection
around the world are primarily led by USTR, in coordination with the
Departments of State and Commerce, USPTO, and the Copyright Office,
among other agencies. These efforts are wide ranging and include the
annual Special 301 review of intellectual property protection abroad,
use of trade preference programs for developing countries, negotiation
of agreements that address intellectual property, and several other
activities.
Special 301 Review Is Central U.S. Policy Effort:
A centerpiece of policy activities is the annual Special 301
process.[Footnote 7] "Special 301" refers to certain provisions of the
Trade Act of 1974, as amended,[Footnote 8] that require USTR to
annually identify foreign countries that deny adequate and effective
protection of intellectual property rights or fair and equitable market
access for U.S. persons who rely on intellectual property protection.
USTR identifies these countries with substantial assistance from
industry and U.S. agencies and publishes the results of its reviews in
an annual report. Once a pool of such countries has been determined,
the USTR, in coordination with numerous agencies, is required to decide
which, if any, of these countries should be designated as a:
Priority Foreign Country (PFC).[Footnote 9] If a trading partner is
identified as a PFC, USTR must decide within 30 days whether to
initiate an investigation of those acts, policies, and practices that
were the basis for identifying the country as a PFC. Such an
investigation can lead to actions such as negotiating separate
intellectual property understandings or agreements between the United
States and the PFC or implementing trade sanctions by the U.S.
government against the PFC if no satisfactory outcome is reached. In
its annual Special 301 report, USTR also lists countries with notable
but less serious intellectual property protection problems as, in order
of decreasing severity, "Priority Watch List" countries and "Watch
List" countries.[Footnote 10] Unlike PFCs, countries cited on these
lists are not subject to automatic consideration for investigation.
Between 1994 and 2004, the U.S. government designated three countries
as PFCs--China, Paraguay, and Ukraine--as a result of intellectual
property reviews (see table 1).[Footnote 11] China was initially
designated as a PFC in 1994 owing to acute copyright piracy, trademark
infringements, and poor enforcement. Paraguay was designated as a PFC
in 1998 owing to high levels of piracy and counterfeiting resulting
from an absence of effective enforcement, its status as a major point
of transshipment for pirated or counterfeit products to other South
American countries, and its inadequate IPR laws. The U.S. government
negotiated separate bilateral intellectual property agreements with
both countries to address these problems. These agreements are subject
to annual monitoring, with progress cited in each year's Special 301
report.
Table 1: Countries Designated as Priority Foreign Countries (PFCs) or
Named to the Priority Watch List Five or More Times during 1994-2004
Special 301 Reviews:
China;
Years designated as a Priority Foreign Country: 1994, 1996;
Number of times cited on the Priority Watch List: --;
Number of times cited on the Watch List: 1.
Paraguay;
Years designated as a Priority Foreign Country: 1998;
Number of times cited on the Priority Watch List: 1;
Number of times cited on the Watch List: 1.
Ukraine;
Years designated as a Priority Foreign Country: 2001-2004;
Number of times cited on the Priority Watch List: 2;
Number of times cited on the Watch List: 1.
Argentina;
Years designated as a Priority Foreign Country: --;
Number of times cited on the Priority Watch List: 9;
Number of times cited on the Watch List: 1.
Dominican Republic;
Years designated as a Priority Foreign Country: --;
Number of times cited on the Priority Watch List: 5;
Number of times cited on the Watch List: 3.
Egypt;
Years designated as a Priority Foreign Country: --;
Number of times cited on the Priority Watch List: 7;
Number of times cited on the Watch List: 4.
European Union;
Years designated as a Priority Foreign Country: --;
Number of times cited on the Priority Watch List: 11;
Number of times cited on the Watch List: --.
Greece;
Years designated as a Priority Foreign Country: --;
Number of times cited on the Priority Watch List: 6;
Number of times cited on the Watch List: 3.
India;
Years designated as a Priority Foreign Country: --;
Number of times cited on the Priority Watch List: 10;
Number of times cited on the Watch List: --.
Indonesia;
Years designated as a Priority Foreign Country: --;
Number of times cited on the Priority Watch List: 8;
Number of times cited on the Watch List: 3.
Israel;
Years designated as a Priority Foreign Country: --;
Number of times cited on the Priority Watch List: 5;
Number of times cited on the Watch List: 3.
Korea;
Years designated as a Priority Foreign Country: --;
Number of times cited on the Priority Watch List: 6;
Number of times cited on the Watch List: 5.
Russia;
Years designated as a Priority Foreign Country: --;
Number of times cited on the Priority Watch List: 8;
Number of times cited on the Watch List: 2.
Turkey;
Years designated as a Priority Foreign Country: --;
Number of times cited on the Priority Watch List: 8;
Number of times cited on the Watch List: 3.
Source: GAO, based on USTR annual Special 301 reports, 1994-2004.
Notes: China and Paraguay are no longer specifically designated as PFCs
or placed on the Priority Watch List because they are subject to
monitoring under separate agreements.
Argentina, India, and China were cited as potential PFCs in the 1994
Special 301 report; China was designated as a PFC later that year,
while Argentina and India were never designated as PFCs.
[End of table]
Ukraine, where optical media piracy was prevalent, was designated a PFC
in 2001.[Footnote 12] No mutual solution was found, and in January
2002, the U.S. government imposed trade sanctions in the form of
prohibitive tariffs (100 percent) aimed at stopping $75 million worth
of certain imports from Ukraine over time.[Footnote 13] These sanctions
negatively affected Ukraine's exports to the United States. U.S. data
show that overall imports from Ukraine experienced a dramatic 70
percent decline from 2000 to 2003. U.S. trade data also show that U.S.
imports of the items facing punitive tariffs (with one exception)
declined by $57 million from 2000 to 2003. Since 2001, Ukraine has
remained the sole PFC and the sanctions have remained in place. In
early 2002, according to Department of State officials, Ukraine passed
an optical disc licensing law--a key U.S. factor in originally
designating Ukraine as a PFC. Further, the Ukrainian government
reportedly closed plants that were pirating optical media products.
However, the U.S. government remains concerned that the optical disc
law is inadequate.
Although it designated only three countries as PFCs between 1994 and
2004, the U.S. government has cited numerous countries--approximately
15 per year recently--on its Special 301 Priority Watch List. Of
particular note, the European Union has been placed on this list every
year since 1994, while India and Argentina have been on the list for 10
and 9 years, respectively, during that period.
By virtue of membership in the WTO, the United States and other
countries commit themselves not to take WTO-inconsistent unilateral
action against possible trade violations involving IPR protections
covered by the WTO but to instead seek recourse under the WTO's dispute
settlement system and its rules and procedures. This may impact any
U.S. government decision regarding whether to retaliate against WTO
members unilaterally with sanctions under the Special 301 process when
those countries' IPR problems are viewed as serious.[Footnote 14]
U.S. Policy Efforts Include Generalized System of Preferences and Other
Trade Preference Programs:
U.S. IPR policy efforts also include use of the Generalized System of
Preferences (GSP) and other trade preference programs administered by
USTR. The GSP is a unilateral program intended to promote development
through trade, rather than through traditional aid programs, by
eliminating tariffs on certain imports from eligible developing
countries. The GSP was originally authorized by the Trade Act of 1974;
when it was reauthorized by the Trade and Tariff Act of 1984, new
"country practice" eligibility criteria were added, including a
requirement that beneficiary countries provide adequate and effective
IPR protection. Petitions to withdraw GSP benefits from countries that
do not meet this criterion can be filed as part of an annual GSP review
and are typically filed by industry interests. Petitions are considered
through an interagency process led by USTR, with input from the
Departments of State and Commerce, among others. In administering the
GSP program, USTR has led reviews of the IPR regimes of numerous
countries and has removed benefits from some beneficiary countries
because of IPR problems.[Footnote 15] Ukraine lost its GSP benefits in
August 2001 (approximately 6 months before the imposition of sanctions
that stemmed from Ukraine's designation as a PFC under the Special 301
process) because of inadequate protection for optical media, and these
benefits have not been reinstated.
Adequate and effective IPR protection is required by other trade
preference programs, including the Andean Trade Preference Act (ATPA),
which provides benefits for Bolivia, Colombia, Ecuador, and Peru; the
African Growth and Opportunity Act (AGOA); and the Caribbean Basin
Initiative (CBI). USTR reviews IPR protection provided under these
trade preference programs, and, according to USTR officials, GSP, which
includes numerous developing countries,[Footnote 16] has been used more
actively (in terms of reviews and actual removal of benefits) than
ATPA, CBI, and AGOA. In fact, according to USTR officials, benefits
have never been removed under ATPA or AGOA owing to IPR concerns.
However, USTR officials emphasized that these programs and their
provisions for intellectual property protection have been used
effectively nevertheless. For example, one USTR official noted that in
response to U.S. government concerns regarding whether Colombia was
meeting ATPA eligibility criteria, the Colombian government implemented
measures to, among other things, ensure the legitimate use and
licensing of software by government agencies. USTR also pointed out
that in Mauritius, an unresolved trademark counterfeiting concern for
U.S. industry was specifically raised with the government of Mauritius
as a follow-up to the annual review of the country's eligibility for
preferences under AGOA. Following bilateral discussions, this
counterfeiting concern was addressed and resolved.
U.S. Government Engages in IPR-related Trade Negotiations:
Since 1990, the U.S. government has negotiated 25 IPR-specific
agreements or understandings with foreign governments. USTR noted that
USPTO and other agencies are responsible for leading negotiating
efforts for such agreements (and the Copyright Office participates in
negotiations as an adviser). According to USTR officials, IPR-specific
agreements are sometimes negotiated in response to particular problems
in certain countries and are monitored when a relevant issue arises.
USTR has also negotiated an additional 23 bilateral trade agreements--
primarily with countries of the former Soviet Union or Eastern Europe-
-that contain IPR provisions (see app. II for a listing of these
agreements).[Footnote 17]
In addition, the U.S. government, primarily USTR and USPTO (with input
from the Copyright Office) participated actively in negotiating the
WTO's Agreement on Trade-Related Aspects of Intellectual Property
(TRIPS), which came into force in 1995 and broadly governs the
multilateral protection of IPR. TRIPS established new or improved
standards of protection in various areas of intellectual
property[Footnote 18] and provides for enforcement measures.[Footnote
19] Most of the U.S. government's IPR-specific bilateral agreements and
understandings were signed prior to the implementation of TRIPS or
before the other country involved in each agreement joined, or acceded
to, the WTO and was thus bound by TRIPS commitments. As a result,
according to a USTR official, some U.S. bilateral agreements have
become less relevant since TRIPS was implemented.[Footnote 20]
One of USTR's priorities in recent years has been negotiating free
trade agreements (FTAs). Since 2000, USTR has completed negotiations
for FTAs with Australia, Bahrain, Central America,[Footnote 21] Chile,
Jordan, Morocco, and Singapore.[Footnote 22] According to officials at
USTR, these agreements offer protection beyond that required in TRIPS,
including, for example, adherence to new WIPO Internet treaties, a
longer minimum time period for copyright protection, additional
penalties for circumventing technological measures controlling access
to copyrighted materials, transparent procedures for protection of
trademarks, stronger protection for well-known marks, patent protection
for plants and animals, protection against arbitrary revocation of
patents, new provisions dealing with domain name disputes, and
increased enforcement measures. A formal private sector advisory
committee that advises the U.S. government on IPR issues[Footnote 23]
has provided feedback to the U.S. government on free-trade agreement
negotiations, including reports on the impact of free-trade agreements
on IPR industries in the United States.[Footnote 24]
U.S. Government Participates in International Organizations That
Address IPR:
The U.S. government is actively involved in the activities of the WTO,
WIPO, and WCO that address IPR issues. The U.S. government participates
in the WTO primarily through the efforts of the USTR offices in
Washington, D.C., and Geneva and participates in WIPO activities
through the Department of State's Mission to the United Nations in
Geneva and through the Copyright Office and the USPTO. The Department
of Homeland Security (DHS) works with the WCO on border enforcement
issues.
The WTO, an international organization with 147 member states, is
involved with IPR primarily through its administration of TRIPS. In
addition to bringing formal TRIPS disputes to the WTO (discussed in the
following section on strengthened foreign IPR laws), the U.S.
government participates in the WTO's TRIPS Council. The council, which
is comprised of all WTO members, is responsible for monitoring the
operation of the TRIPS agreement and can be used by members as a forum
for mutual consultation about TRIPS implementation. Recently the
council has addressed issues such as TRIPS and public health.[Footnote
25] A WTO IPR official stated that the U.S. government is the most
active "pro-IPR" delegate during council activities. The U.S.
government is also a major contributor to reviews of WTO members'
overall country trade policies; these reviews are intended to
facilitate the smooth functioning of the multilateral trading system by
enhancing the transparency of members' trade policies.[Footnote 26] All
WTO member countries are reviewed, and the frequency of each country's
review varies according to its share of world trade. According to a
USTR official in Geneva, IPR is often a central topic of discussion
during the trade policy reviews, and the U.S. government poses
questions regarding a country's compliance with TRIPS when relevant.
The United States also provides input as countries take steps to accede
to the WTO, and, according to the USTR official, IPR is always a
primary issue during this process. As of June 2004, 26 countries were
working toward WTO accession.
The Department of State, the Copyright Office, and USPTO actively
participate in the activities of WIPO, a specialized United Nations
agency with 180 member states that promotes the use and protection of
intellectual property. Of particular note, WIPO is responsible for the
creation of two "Internet treaties" that entered into force in
2002.[Footnote 27] In addition, WIPO administers the 1970 Patent
Cooperation Treaty (PCT), which makes it possible to seek patent
protection for an invention simultaneously in each of a large number of
countries by filing an "international" patent application. According to
a WIPO Vice Director General, the State Department's U.S. Mission in
Geneva and USPTO work closely with WIPO, and the U.S. government has
actively participated in WIPO activities and monitored the use of
WIPO's budget.[Footnote 28] The Copyright Office also participates in
various activities of the WIPO General Assembly and WIPO committees and
groups, including the WIPO Standing Committee on Copyright and Related
Rights. USPTO has participated in WIPO efforts such as the negotiation
of the Internet treaties (the Copyright Office was also involved in
this effort) and also conducts joint USPTO-WIPO training events.
In addition, DHS works with the WCO regarding IPR protection. DHS
participates in the WCO's IPR Strategic Group, which was developed as a
joint venture with international business sponsors to help member
customs administrations to improve the efficiency and effectiveness of
their IPR border enforcement programs. The IPR Strategic Group meets
quarterly to coordinate its activities, discuss current issues on IPR
border enforcement, and advise member customs administrations regarding
implementation of border measures under TRIPS. Further, a DHS official
emphasized that DHS has been involved in drafting WCO model IPR
legislation and strategic plans geared towards global IPR protection
and otherwise helping foreign countries develop the tools necessary for
effective border enforcement programs.
U.S. Officials Undertake Diplomatic Efforts to Protect Intellectual
Property:
In countries where IPR problems persist, U.S. government officials
maintain a regular dialogue with foreign government representatives. In
addition to the bilateral discussions that are held as a result of the
Special 301 process and other specific initiatives, U.S. officials
address IPR as part of regular bilateral relations. We also noted that
U.S. government officials at U.S. embassies overseas take the
initiative, in coordination with U.S. agencies in Washington, D.C., to
pursue IPR with foreign officials. For example, according to officials
at the U.S. Embassy in Moscow, the economic section holds interagency
IPR coordination meetings and has met regularly with the Russian
ministry responsible for IPR issues to discuss U.S. concerns. In
Ukraine, State Department officials told us that they communicate
regularly with the Ukraine government as part of a dialogue regarding
the actions needed for the removal of Special 301 sanctions. U.S.
embassies also undertake various public awareness activities and
campaigns aimed at increasing support for intellectual property in the
general public as well as among specific populations, such as law
enforcement personnel, in foreign countries.[Footnote 29] Further,
staff from the Departments of State and Commerce at U.S. embassies
interact with U.S. companies overseas and work to assist them with
commercial problems, including IPR concerns, and have at times raised
specific industry concerns with foreign officials.[Footnote 30]
Finally, a Justice official told us that during the past 2 years,
Justice attorneys engaged high-level law enforcement officials in
China, Brazil, and Poland in an effort to bolster coordination on
cross-border IPR cases.
Diplomatic efforts addressing IPR have also included actions by senior
U.S. government officials. For example, a senior official at the
Commerce Department met in 2004 with the Brazilian minister responsible
for industrial property issues, such as patents and trademarks, to
discuss collaboration and technical assistance opportunities. In China,
the U.S. Ambassador places a great emphasis on IPR and has organized an
interagency task force that will work to implement an IPR Action Plan.
In addition, presidential-level communication regarding IPR has
occurred with some countries. For instance, according to Department of
State sources, the Presidents of the United States and Russia discussed
IPR, among other issues, when they met in September 2003. Further, USTR
officials told us that the Presidents of the United States and Paraguay
had IPR as an agenda item when they met in the fall of 2003.
Most Agencies Conduct IPR Training and Assistance Activities:
Most of the agencies involved in efforts to promote or protect IPR
overseas engage in some training or technical assistance activities.
Key activities to develop and promote enhanced IPR protection in
foreign countries are undertaken by the Departments of Commerce,
Homeland Security, Justice, and State; the FBI; USPTO; the Copyright
Office; and USAID. These agencies also participate in an IPR Training
Coordination Group.
Training events sponsored by U.S. agencies to promote the enforcement
of intellectual property rights have included enforcement programs for
foreign police and customs officials, workshops on legal reform, and
joint government-industry events. According to a State Department
official, U.S. government agencies, including USPTO,[Footnote 31] the
Department of Commerce's Commercial Law Development Program, the
Departments of Justice and Homeland Security have conducted
intellectual property training for a number of countries concerning
bilateral and multilateral intellectual property commitments,
including enforcement, during the past few years. For example,
intellectual property training has been conducted by a number of
agencies over the last year in Poland, China, Morocco, Italy, Jordan,
Turkey, and Mexico. We attended a joint USPTO-WIPO training event in
October 2003 in Washington, D.C., that covered U.S. and WTO patent,
copyright, and trademark laws and enforcement. About 35 participants
from numerous countries, ranging from supreme court judges to members
of national police forces, attended the event. An official at the State
Department observed that the Special 301 report is an important factor
in determining training priorities. Other agency officials noted
additional factors determining training priorities, including embassy
input, cost, and requirements of trade and investment agreements.
Although regularly sponsored by a single agency, individual training
events often involve participants from other agencies and the private
sector.
In addition to sponsoring seminars and short-term programs, agencies
sponsor longer-term programs for developing improved intellectual
property protection in other countries. For example, USAID funded two
multiyear programs, the first of which began in 1996, aimed at
improving the intellectual property regime in Egypt through public
awareness campaigns, training, and technical assistance in developing
intellectual property legislation and establishing a modern patent and
trademark office. USAID has also sponsored longer-term bilateral
programs that are aimed at promoting biotechnology and address relevant
IPR issues such as plant variety protection. Private sector officials
in Brazil told us that they believed the longer-term programs sponsored
by USAID elsewhere would be helpful in Brazil. In addition to USAID,
other U.S. agencies that sponsor training also provide other types of
technical assistance in support of intellectual property rights. For
example, the Copyright Office and USPTO revise and provide comments on
proposed IPR legislation.[Footnote 32] Training and technical
assistance activities that focus more broadly on institution building,
biotechnology, organized crime, and other law enforcement issues may
also support improved intellectual property enforcement.[Footnote 33]
Select Agencies Engage in U.S. IPR Law Enforcement Efforts:
A small number of agencies are involved in enforcing U.S. intellectual
property laws. Working in an environment where counterterrorism is the
central priority, the FBI and the Departments of Justice and Homeland
Security take actions that include engaging in multicountry
investigations involving intellectual property violations and seizing
goods that violate intellectual property rights at U.S. ports of entry.
In addition, the USITC is responsible for some enforcement activities
involving patents and trademarks.
U.S. Agencies Investigate IPR Violations:
Although officials at the FBI, DHS, and Justice have emphasized that
counterterrorism is the overriding law enforcement priority, these
agencies nonetheless undertake IPR investigations that involve foreign
connections. For example, the Department of Justice has an office that
directly addresses international IPR problems.[Footnote 34] Justice has
been involved with international investigation and prosecution efforts
and, according to a Justice official, has become more aggressive in
recent years. For example, Justice and the FBI recently coordinated an
undercover IPR investigation, with the involvement of foreign law
enforcement agencies. The investigation focused on individuals and
organizations, known as "warez" release groups, that specialize in the
Internet distribution of pirated materials. In April 2004, these
investigations resulted in 120 simultaneous searches worldwide (80 in
the United States) by law enforcement entities from 10 foreign
countries[Footnote 35] and the United States in an effort known as
"Operation Fastlink."[Footnote 36]
Law enforcement officials told us that IPR-related investigations with
an international component can be instigated by, for example, industry
complaints to agency headquarters or field offices. Investigations are
pursued if criminal activity is suspected. U.S. officials noted that
foreign law enforcement action may be encouraged by the U.S. government
if an investigation results in evidence demonstrating that someone has
violated U.S. law and if evidence in furtherance of the crime is
located overseas. A Justice official added that international
investigations are pursued when there is reason to believe that foreign
authorities will take action and that additional impact, such as
raising public awareness about IPR crimes, can be achieved. Evidence
can be developed through investigative cooperation between U.S. and
foreign law enforcement. In addition, the Justice official emphasized
that the department also supports prosecutorial efforts in foreign
countries. International cooperation between the United States and
other countries can be facilitated through Mutual Legal Assistance
Treaties (MLATs), which are designed to facilitate the exchange of
information and evidence for use in criminal investigations and
prosecutions.[Footnote 37] MLATs include the power to summon witnesses,
compel production of documents and other real evidence, issue search
warrants, and serve process. A Justice official emphasized that
informal international cooperation can also be extremely productive.
Although investigations can result in international actions such as
those cited above, law enforcement officials from the FBI told us that
they cannot determine the number of past or present IPR cases with an
international component because they do not track or categorize cases
according to this factor. DHS officials emphasized that a key component
of their enforcement authority is a "border nexus." Investigations have
an international component established when counterfeit goods are
brought into the United States, and DHS officials noted that it is a
rare exception when DHS IPR investigations do not have an international
component. However, DHS does not track cases by a specific foreign
connection. The overall number of IPR-oriented investigations that have
been pursued by foreign authorities as a result of DHS efforts is
unknown.
Department of Homeland Security Seizes Items Violating IPR:
DHS seizures of goods that violated IPR totaled more than $90 million
in fiscal year 2003. While the types of imported products seized have
varied little from year to year (in recent years, products such as
cigarettes, wearing apparel, watches, and media products--CDs, DVDs,
and tapes--have been key products), the value of seizures for some of
these products has varied greatly. For example, in fiscal year 1999,
the value of seized media products--for example, CDs, DVDs, and tapes-
-was, at nearly $40 million, notably higher than the value of any other
product; by 2003, the value of seized counterfeit cigarettes, at more
than $40 million, was by far the highest, while media products
accounted for less than $10 million in seizures. Seizures of IPR-
infringing goods have involved imports primarily from Asia. In fiscal
year 2003, goods from China accounted for about two-thirds of the value
of all IPR seizures, many of them shipments of cigarettes.[Footnote 38]
Other seized goods from Asia that year originated in Hong Kong and
Korea. DHS has highlighted particular recent seizures, such as an
estimated $500,000 in electrically heated coffee mugs bearing
counterfeit Underwriters Laboratories (UL) labels and an estimated
$644,000 in pirated video game CDs.[Footnote 39] A DHS official pointed
out that providing protection against IPR-infringing imported goods for
some U.S. companies--entertainment companies in particular--can be
difficult, because companies often fail to record their trademarks and
copyrights with DHS.
U.S. International Trade Commission Conducts Section 337
Investigations:
The USITC investigates and adjudicates Section 337 cases,[Footnote 40]
which involve allegations of certain unfair practices in import trade,
generally related to patent or registered trademark infringement.
Although the cases must involve merchandise originating overseas, both
complainants and respondents can be from any country as long as the
complainant owns and exploits an intellectual property right in the
United States. U.S. administrative law judges are responsible for
hearing cases and issuing an initial decision, which is then reviewed
and issued, modified, or rejected by the USITC. If a violation has
occurred, remedies include directing DHS officials to exclude
infringing articles from entering the United States. The USITC may
issue cease-and-desist orders to the violating parties. Violations of
cease-and-desist orders can result in civil penalties. As of June 2004,
exclusion orders remained in effect for 51 concluded Section 337
investigations, excluding from U.S. entry goods such as certain
toothbrushes, memory chips, and video game accessories that were found
to violate a U.S. intellectual property right.
U.S. Efforts Have Contributed to Improved Foreign IPR Laws, but
Enforcement Overseas Remains Weak; Industry Supports U.S. Efforts:
U.S. efforts have contributed to strengthened foreign IPR laws and
international IPR obligations, and, while enforcement overseas remains
weak, U.S. industry groups are generally supportive of U.S. efforts.
U.S. actions are viewed as aggressive, and Special 301 is characterized
as a useful tool in encouraging improvements overseas. However, the
specific impact of many U.S. activities, such as diplomatic efforts or
training and technical assistance, can be difficult to measure.
Further, despite the progress that has been achieved, enforcement of
IPR in many countries remains weak and, as a result, has become a U.S.
government priority. Although U.S. industries recognize that problems
remain, they acknowledge the many actions taken by the U.S. government,
and industry representatives that we contacted in the United States and
abroad were generally supportive of the U.S. efforts to pursue
intellectual property protection overseas.
U.S. Efforts Have Contributed to Strengthened Foreign IPR Laws:
Several representatives of major intellectual property industry
associations stated that the United States is the most aggressive
promoter of intellectual property rights in the world; an IPR official
at the WTO concurred with this assessment, as did foreign officials.
The efforts of U.S. agencies have contributed to the establishment of
strengthened intellectual property legislation in many foreign
countries.
The United States has realized progress through bilateral efforts. For
example, the Special 301 review has been cited by industry as
facilitating the introduction or strengthening of IPR laws around the
world over the past 15 years. In the 2004 Special 301 report, USTR
noted that Poland and the Philippines had recently passed optical disc
legislation aimed at combating optical media piracy; the 2003 Special
301 report had cited both countries for a lack of such legislation.
Special 301 is cited by USTR and industry as an effective tool in
alerting a country that it has trade problems with the United States,
which is a key trading partner for numerous nations. Industry and USTR
officials pointed out that countries are eager to avoid being publicly
classified as problem nations. Further, according to U.S. government
officials, incremental "invisible" changes take place behind the scenes
as countries take actions to improve their standing on the Special 301
listing prior to its publication. USTR notes that legislative
improvements have been widespread but also cites other accomplishments,
such as raids against pirates and counterfeiters in Poland and Taiwan,
resulting from U.S. attention and the Special 301 process.
However, Special 301 can have an alienating effect when countries
believe they have made substantial improvements in their IPR regimes
but the report are still cites them as key problem countries. According
to some officials we spoke with in Brazil and Ukraine, this happened in
their countries. For example, although Ukrainian government officials
we spoke with stated their desire to further respond to U.S. concerns,
they expressed the view that the sanctions have run their course. They
also said that the Ukrainian government cannot understand why Ukraine
was targeted for sanctions while other countries where U.S. industry
losses are higher have not been targeted. A USTR official responsible
for IPR issues informed us that Ukraine was sanctioned because of IPR
problems that the U.S. government views as serious.
Additional bilateral measures are cited as successful in encouraging
new improvements overseas in the framework for IPR protection. For
example, following a 1998 U.S. executive order directing U.S.
government agencies to ensure the legitimate use of software, USTR then
addressed this issue with foreign governments and has reportedly
achieved progress in addressing this violation of IPR. According to
USTR, more than 20 foreign governments have issued decrees mandating
that government ministries use only authorized software. As another
example, the negotiation of FTAs has been cited by government and IPR
industry officials as a useful tool, particularly as such agreements
require IPR protections, including protection for digital products,
beyond what is required in TRIPS. However, because most FTAs have been
negotiated within the past 5 years, their long-term impact remains to
be seen.
U.S. efforts through multilateral forums have also had positive
effects. For example, as a result of TRIPS obligations--which the U.S.
government was instrumental in negotiating--many developing countries
have improved their statutory systems for the protection of
intellectual property. For example, China revised its intellectual
property laws and regulations to meet its WTO TRIPS commitments.
Further, in Ukraine and Russia, government officials told us that
improvements to their IPR legislation was part of a movement to accede
to the WTO. U.S. agencies have assisted other developing countries in
drafting TRIPS-compliant laws.
In addition, a WTO member country can bring disputes over TRIPS
compliance to the WTO through that organization's dispute settlement
mechanism. The U.S. government has exercised this right and brought
more TRIPS cases to the WTO for resolution than any other WTO member.
Since 1996, the United States has brought a total of 12 TRIPS-related
cases against 11 countries[Footnote 41] and the European Community (EC)
to the WTO (see app. III for a listing of these cases). Of these cases,
8 were resolved before going through the entire dispute settlement
process by mutually agreed solutions between the parties--the preferred
outcome, according to a USTR official. In nearly all of these cases,
U.S. concerns were addressed via changes in laws or regulations by the
other party. Only 2 have resulted in the issuance of a final decision,
or panel report, both of which were favorable rulings for the United
States.[Footnote 42] In a case involving Argentina, consultations
between the countries are ongoing and the case has been partially
settled, and another case regarding an EC regulation protecting
geographical indications is currently in panel proceedings.[Footnote
43]
Impact of Many Activities Can Be Difficult to Measure:
Despite the fact that persistent U.S. efforts have contributed to
positive developments, it can be difficult to precisely measure the
impact of specific U.S. activities such as policy efforts or training
assistance programs. U.S. activities are not conducted in isolation,
but are part of the spectrum of political considerations in a foreign
country. Although regular efforts such as the annual Special 301 review
or diplomatic contact may create incentives for countries to improve
intellectual property protection, other factors, such as countries' own
political interests, may contribute to or hinder improvements.
Therefore, it can be difficult to measure changes resulting from U.S.
efforts alone. For example, China revised its intellectual property
laws as a result of its accession to WTO. Although China had for some
time been under pressure from the United States to improve its
intellectual property protection, revisions to its intellectual
property legislation were also called for by its newly acquired WTO
commitments. Thus, it is nearly impossible to attribute any of these
developments to particular factors or to precisely measure the
influence of individual factors on China's decision to reform. Further,
officials at the U.S. Embassy in Moscow have emphasized that the
regular U.S. focus on IPR issues has raised the profile of the issue
with the Russian government--a positive development. However, once
again, it is difficult to determine the specific current and future
effects of this development on intellectual property protection.
Nonetheless, despite these limitations, several agency officials we
spoke with said that these activities are important and contribute to
incremental changes in IPR protection (such as legislative improvements
to Russia's copyright law that were enacted in July 2004). A Commerce
official also noted that regular contacts by U.S. government officials
with their foreign counterparts have apparently helped some individual
U.S. companies seeking to defend patent or trademark rights overseas by
reminding foreign officials that their administrative proceedings for
such protection are under U.S. scrutiny.
Regarding training activities, officials at agencies that provide
regular training reported using post-training questionnaires by
attendees to evaluate the trainings, but several noted that beyond
these efforts, assessing the impact of trainings is challenging. An
official at USPTO stated that although he does not believe it is
possible to quantify fully the impact of USPTO training programs,
accumulated anecdotal evidence from embassies and the private sector
has led the office to believe that the activities are useful and have
resulted in improvements in IPR enforcement. USPTO recently began
sending impact evaluation questionnaires to training attendees 1 year
after the training, to try to gather more information on long-term
impact. However, a low response rate has thus far limited the
effectiveness of this effort. Officials from the Departments of State
and Commerce also pointed out anecdotal evidence that training and
technical assistance activities are having a positive impact on the
protection of intellectual property overseas. Although some industry
officials raised criticisms or offered suggestions for improving
training, including using technology to offer more long-distance
training and encouraging greater USAID involvement in coordination
efforts, many were supportive of U.S. training efforts.
Enforcement Overseas Remains Weak:
Despite improvements in intellectual property laws, the enforcement of
intellectual property rights remains weak in many countries, and U.S.
government and industry sources note that improving enforcement
overseas is now a key priority. USTR's most recent Special 301 report
states that "although several countries have taken positive steps to
improve their IPR regimes, the lack of IPR protection and enforcement
continues to be a global problem." For example, although the Chinese
government has improved its statutory IPR regime, USTR remains
concerned about enforcement in that country. According to USTR,
counterfeiting and piracy remain rampant in China and increasing
amounts of counterfeit and pirated products are being exported from
China. USTR's 2004 Special 301 report states that "[a]ddressing weak
IPR protection and enforcement in China is one of the Administration's
top priorities." Further, Brazil has adopted modern copyright
legislation that appears to be generally consistent with TRIPS, but it
has not undertaken adequate enforcement actions, according to USTR's
2003 Special 301 Report. In addition, as noted above, although Ukraine
has shut down offending domestic optical media production facilities,
pirated products continue to pervade Ukraine, and, according to USTR's
2004 Special 301 Report, Ukraine is also a major trans-shipment point
and storage location for illegal optical media produced in Russia and
elsewhere as a result of weak border enforcement efforts (see fig. 1).
An industry official pointed out that addressing foreign enforcement
problems is a difficult issue for the U.S. government.
Figure 1: Pirated DVDs from Brazil, China, and Ukraine:
[See PDF for image]
[End of figure]
Although U.S. law enforcement does undertake international cooperative
activities to enforce intellectual property rights overseas, executing
these efforts can prove difficult. For example, according to DHS and
Justice officials, U.S. efforts to investigate IPR violations overseas
are complicated by a lack of jurisdiction as well as by the fact that
U.S. officials must convince foreign officials to take action. Further,
a DHS official noted that in some cases, activities defined as criminal
in the United States are not viewed as an infringement by other
countries, and U.S. law enforcement agencies can therefore do nothing.
In particular, this official cited China as a country that has not
cooperated in investigating IPR violations. However, according to DHS,
recently the Chinese government assisted DHS in an undercover IPR
criminal investigation (targeting a major international counterfeiting
network that distributed counterfeit motion pictures worldwide) that
resulted in multiple arrests and seizures.[Footnote 44]
While less constrained than law enforcement, training and technical
assistance activities may also be unable to achieve the desired
improvements in IPR enforcement in some cases, even when considerable
U.S. assistance is provided. For example, despite USAID's long-term
commitment to strengthening IPR protection in Egypt with training and
technical assistance programs, Egypt was elevated to the Priority Watch
List in the 2004 Special 301 report and IPR enforcement problems
clearly persist.
Industry Generally Supports U.S. Efforts, Despite Worsening Problems in
Some Areas:
Despite the weakness of IPR enforcement in many countries, industry
groups representing intellectual property concerns for U.S. industries
we contacted were generally supportive of U.S. government efforts to
protect U.S. intellectual property overseas. Numerous industry
representatives in the U.S. and overseas expressed satisfaction with a
number of U.S. activities as well as with their interactions and
collaborations with U.S. agencies and embassies in support of IPR.
Industry representatives have been particularly supportive of the
Special 301 process, and many credited it for IPR improvements
worldwide. According to an official from a key industry association,
Special 301 "is a great statutory tool, it leads to strong and
effective interagency coordination, and it gets results." Industry
associations overseas and in the U.S. support the Special 301 process
with information based on their experiences in foreign countries. An
entertainment software industry official stated that the U.S.
government has "consistently demonstrated their strong and continuing
commitment to creators—pressing for the highest attainable standards of
protection for intellectual property rights—.One especially valuable
tool has been the Special 301 review process." Other representatives
have advocated increased use of leverage provided by trade preference
programs, particularly the GSP program.
Industry association officials in the United States and private sector
officials in Brazil, Russia, and Ukraine also expressed support for
U.S. IPR training activities, despite limited evidence of long-term
impact. Industry associations regularly collaborate with U.S. agencies
to sponsor and participate in training events for foreign officials. A
number of government and law enforcement officials in our case study
countries commented that training and seminars sponsored by the U.S.
government were valuable as forums for learning about IPR. Others,
including private sector officials, commented on the importance of
training as an opportunity for networking with other officials and
industry representatives concerned with IPR enforcement. Nonetheless,
some industry officials acknowledged that U.S. actions cannot always
overcome challenges presented by political and economic factors in
other countries.
Industry support occurs in an environment where, despite improvements
such as strengthened foreign IPR legislation, the situation may be
worsening overall for some intellectual property sectors. For example,
according to copyright industry estimates, losses due to piracy grew
markedly in recent years. The entertainment and business software
sectors, for example, which are very supportive of USTR and other
agencies, face an environment where their optical media products are
increasingly easy to reproduce, and digitized products can be
distributed around the world quickly and easily via the Internet.
According to an intellectual property association representative,
counterfeiting trademarks has also become more pervasive in recent
years. Counterfeiting affects more than just luxury goods; it also
affects various industrial goods.
Several Mechanisms Coordinate IPR Efforts, but Their Usefulness Varies:
Several interagency mechanisms exist to coordinate overseas
intellectual property policy initiatives, development and assistance
activities, and law enforcement efforts, although these mechanisms'
level of activity and usefulness varies. The mechanisms include
interagency coordination on trade (IPR) issues; the IPR Training
Coordination Group, which maintains a database of training activities;
the National Intellectual Property Law Enforcement Coordination
Council; and the National IPR Coordination Center. Apart from formal
coordination bodies, regular, informal communication and coordination
regarding intellectual property issues also occurs among policy
agencies in the United States and in overseas embassies and is viewed
as important to the coordination process.
Formal Interagency Coordination Mechanism Viewed as Working Well:
According to government and industry officials, an interagency trade
policy mechanism established by Congress has operated effectively in
reviewing IPR issues (see fig. 2). In 1962, the Congress established
the mechanism to assist USTR in developing policy on trade and trade-
related investment, and the annual Special 301 review is conducted with
this tool.[Footnote 45] Three tiers of committees constitute the
principal mechanism for developing and coordinating U.S. government
positions on international trade, including IPR. The Trade Policy
Review Group (TPRG) and the Trade Policy Staff Committee (TPSC),
administered and chaired by USTR, are the subcabinet interagency trade
policy coordination groups that participate in trade policy
development.[Footnote 46] More than 80 working-level subcommittees are
responsible for providing specialized support for the TPSC.
One of the specialized subcommittees is central to conducting the
annual Special 301 review and determining the results of the review.
During the 2004 review, which began early in the year, the Special 301
subcommittee met formally seven times, according to a USTR
official.[Footnote 47] The subcommittee reviewed responses to a Federal
Register request for information about intellectual property problems
around the world; it also reviewed responses to a cable sent to every
U.S. embassy soliciting specific information on IPR issues. IPR
industry associations provided lengthy, detailed submissions to the
U.S. government during the Special 301 review; such submissions
identify IPR problems in countries around the world and are an
important component in making a determination as to which countries
will be cited in the final report. After reaching its own decisions on
country placement, the subcommittee submitted its proposal to the Trade
Policy Staff Committee. The TPSC met twice and submitted its
recommendations to the TPRG for final approval. The TPRG reached a
final decision via e-mail, and the results of this decision were
announced with the publication of the Special 301 report on May 3,
2004. The entire process for 2004 is considered typical of how the
annual process is usually conducted. In addition, this subcommittee can
meet at other times to address IPR issues as appropriate.
According to U.S. government and industry officials, this interagency
process is rigorous and effective. A USTR official stated that the
Special 301 subcommittee is very active, and subcommittee leadership
demonstrates a willingness to revisit issues raised by other agencies
and reconsider positions. A Commerce official told us that the Special
301 review is one of the best tools for interagency coordination in the
government and that the review involves a "phenomenal" amount of
communication. A Copyright Office official noted that coordination
during the review is frequent and effective. A representative for
copyright industries also told us that the process works well and is a
solid interagency effort.
Figure 2: U.S. Agency Participation in Coordination Mechanisms:
[See PDF for image]
[A] While 22 government bodies are invited to participate in this
effort, we are only listing those agencies included in our report.
[B] The U.S. Patent and Trademark Office does not vote separate and
apart from the Department of Commerce.
[C] Consulted.
[D] Not a voting member.
[E] The two agencies share joint leadership of the center.
[End of figure]
IPR Training Coordination Group Facilitates Collaboration, though
Database Is Incomplete:
The IPR Training Coordination Group, intended to inform its
participants about IPR training activities and facilitate
collaboration, developed a database to record and track training
events, but we found that the database was incomplete. This voluntary,
working-level group comprises representatives of U.S. agencies and
industry associations involved in IPR programs and training and
technical assistance efforts overseas or for foreign officials.
Meetings are held approximately every 4 to 6 weeks and are well
attended by government and private sector representatives. The State
Department leads the group and supplies members with agendas and
meeting minutes. Training Coordination Group meetings in 2003 and 2004
have included discussions on training "best practices," responding to
country requests for assistance, and improving IPR awareness among
embassy staff. According to several agency and private sector
participants, the group is a useful mechanism that keeps participants
informed of the IPR activities of other agencies or associations and
provides a forum for coordination.
Since it does not independently control budgetary resources, the group
is not responsible for sponsoring or evaluating specific U.S.
government training events. One agency official noted that, partly
owing to the lack of funding coordination, the training group serves
more as a forum to inform others regarding already-developed training
plans than as a group to actively coordinate training activities across
agencies. Officials at the Department of Commerce's Commercial Law
Development Program and USPTO commented that available funds, more than
actual country needs, often determine what training they are able to
offer. A private sector official also voiced this concern, and several
agency and industry officials commented that more training
opportunities were needed.[Footnote 48] A Justice official also noted
that if there were more active interagency consultations, training
could be better targeted to countries that need criminal enforcement
training.
The Training Coordination Group helped develop a public training
database,[Footnote 49] which it uses as a resource to identify planned
activities and track past efforts. However, although the database has
improved in recent years to include more training events and better
information, it remains incomplete. Officials from the Copyright Office
and USPTO stated that the database should contain records of all of
their training efforts, but officials from other agencies, including
the Departments of Commerce, State, and Justice, and the FBI,
acknowledged that it might not record all the training events they have
conducted. Although the group's meetings help to keep the database
updated by identifying upcoming training offered by members that have
not been entered into the database, training activities that are not
raised at the meeting or that are sponsored by embassies or an agency
not in attendance may be overlooked. In addition, USAID submits
training information only once per year at the conclusion of its own
data-gathering exercise. Since USAID is a major sponsor of training
activities--in 2002, according to the database, USAID sponsored or
cosponsored nearly one-third of the total training events--the lack of
timely information is notable. Several members expressed frustration
that USAID does not contribute to the database regularly and inform the
group about training occurring through its missions. USAID officials
noted that the decentralization of their agency makes it difficult for
them to address these concerns, because individual missions plan and
implement training and technical assistance activities independently.
Council to Coordinate IPR Enforcement Has Had Little Impact:
The National Intellectual Property Law Enforcement Coordination Council
(NIPLECC), created by the Congress in 1999 to coordinate domestic and
international intellectual property law enforcement among U.S. federal
and foreign entities, seems to have had little impact. NIPLECC consists
of (1) the Under Secretary of Commerce for Intellectual Property and
Director of the United States Patent and Trademark Office; (2) the
Assistant Attorney General, Criminal Division; (3) the Under Secretary
of State for Economic and Agricultural Affairs; (4) the Deputy United
States Trade Representative; (5) the Commissioner of Customs; and (6)
the Under Secretary of Commerce for International Trade. NIPLECC is
also required to consult with the Register of Copyrights on law
enforcement matters relating to copyright and related rights and
matters. NIPLECC's authorizing legislation did not include the FBI as a
member of NIPLECC, despite its pivotal role in law enforcement.
However, according to representatives of the FBI, USPTO, and Justice,
the FBI should be a member. NIPLECC, which has no independent staff or
budget, is cochaired by USPTO and Justice. In the council's nearly 4
years of existence, its primary output has been three annual reports to
the Congress, which are required by statute.
In its first year, according to the first annual report, NIPLECC met
four times to begin shaping its agenda. It also consulted with industry
and accepted written comments from the public related to what matters
the council should address and how it should structure council-industry
cooperation. It drafted a working paper detailing draft goals and
proposed activities for the council. Goals and activities identified in
the first report were "draft" only, because of the imminent change in
administration. Although left open for further consideration, the
matters raised in this report were not specifically addressed in any
subsequent NIPLECC reports.
NIPLECC's second annual report states that the council's mission
includes "law enforcement liaison, training coordination, industry and
other outreach and increasing public awareness."[Footnote 50] In
particular, the report says, the council "determined that efforts
should focus on a campaign of public awareness, at home and
internationally, addressing the importance of protecting intellectual
property rights." However, other than a one-page executive summary of
NIPLECC's basic mission, the body of the second annual report consists
entirely of individual agencies' submissions on their activities and
details no activities undertaken by the council. NIPLECC met twice in
the year between the first and second reports.
The third annual report also states that "efforts should focus on a
campaign of public awareness, at home and internationally, addressing
the importance of intellectual property rights."[Footnote 51] Although
this is identical to the language in the previous year's report, there
is little development of the theme, and no evidence of actual progress
over the course of the previous year. Like the previous year's report,
other than a single-page executive summary, the body of the report
consists of individual agency submissions detailing agency efforts, not
the activities or intentions of the council. The report does not
provide any detail about how NIPLECC has, in its third year,
coordinated domestic and international intellectual property law
enforcement among federal and foreign entities.
Under its authorizing legislation, NIPLECC has a broad mandate.
According to interviews with industry officials and officials from
NIPLECC member agencies, and as evidenced by its own legislation and
reports, NIPLECC continues to struggle to define its purpose and has as
yet had little discernable impact. Indeed, officials from more than
half of the member agencies offered criticisms of the NIPLECC,
remarking that it is unfocused, ineffective, and "unwieldy." In
official comments to the council's 2003 annual report, major IPR
industry associations expressed a sense that NIPLECC is not undertaking
any independent activities or effecting any impact. One industry
association representative stated that there is a need for law
enforcement to be made more central to U.S. IPR efforts and said that
although he believes the council was created to deal with this issue,
it has "totally failed." The lack of communication regarding
enforcement results in part from complications such as concerns
regarding the sharing of sensitive law enforcement information and from
the different missions of the various agencies involved in intellectual
property actions overseas. According to an official from USPTO, NIPLECC
is hampered primarily by its lack of independent staff and funding. He
noted, for example, a proposed NIPLECC initiative for a domestic and
international public awareness campaign that has not been implemented
owing to insufficient funds. According to a USTR official, NIPLECC
needs to define a clear role in coordinating government policy. A
Justice official stressed that, when considering coordination, it is
important to avoid creating an additional layer of bureaucracy that may
detract from efforts devoted to each agency's primary mission. This
official also commented that while NIPLECC's stated purpose of
enhancing interagency enforcement coordination has not been achieved,
the shortcomings of NIPLECC should not suggest an absence of effective
interagency coordination elsewhere.
Despite NIPLECC's difficulties thus far, we heard some positive
comments regarding this group. For example, an official from USPTO
noted that the IPR training database web site resulted from NIPLECC
efforts. Further, an official from the State Department commented that
NIPLECC has had some "trickle-down" effects, such as helping to
prioritize the funding and development of the intellectual property
database at the State Department. Although NIPLECC principals meet
infrequently and NIPLECC has undertaken few concrete activities, this
official noted that NIPLECC is the only forum for bringing enforcement,
policy, and foreign affairs agencies together at a high level to
discuss intellectual property issues. A USPTO official stated that
NIPLECC has potential, but needs to be "energized."
National IPR Coordination Center Is Not Widely Used by Industry:
The National IPR Coordination Center (the IPR Center) in Washington,
D.C., a joint effort between DHS and the FBI, began limited operations
in 2000.[Footnote 52] According to a DHS official, the coordination
between DHS, the FBI, and industry and trade associations makes the IPR
Center unique. The IPR Center is intended to serve as a focal point for
the collection of intelligence involving copyright and trademark
infringement, signal theft, and theft of trade secrets. Center staff
analyze intelligence that is collected through industry referrals of
complaints (allegations of IPR infringements) and, if criminal activity
is suspected, provide the information for use by FBI and DHS field
components. The FBI at the IPR Center holds quarterly meetings with 11
priority industry groups to discuss pressing issues on violations
within the specific jurisdiction of the FBI. Since its creation, the
IPR Center has received 300 to 400 referrals, according to an IPR
Center official. The center is also involved in training and outreach
activities. For example, according to IPR Center staff, between May
2003 and April 2004, personnel from the center participated in more
than 16 IPR training seminars and conducted 22 outreach events.
The IPR Center is not widely used by industry. An FBI official
associated with the IPR Center estimated that about 10 percent of all
FBI industry referrals come through the center rather than going
directly to FBI field offices. DHS officials noted that "industry is
not knocking the door down" and that the IPR Center is perceived as
underutilized. An FBI official noted that the IPR Center is functional
but that it generally provides training, outreach, and intelligence to
the field rather than serving as a primary clearinghouse for referral
collection and review. The IPR Center got off to a slow start partly
because, according to an FBI official, after the events of September
11, 2001, many IPR Center staff were reassigned, and the center did not
become operational until 2002. The IPR Center is authorized for 24
total staff (16 from DHS and 8 from the FBI); as of July 2004, 20 staff
(13 DHS, 7 FBI) were "on board" at the center, according to an IPR
Center official. This official noted that the center's use has been
limited by the fact that big companies have their own investigative
resources, and not all small companies are familiar with the IPR
Center.[Footnote 53]
Informal Coordination Is Considered Important among Policy Agencies:
In addition to the formal coordination efforts described, policy agency
officials noted the importance of informal but regular communication
among staff at the various agencies involved in the promotion or
protection of intellectual property overseas. Several officials at
various policy-oriented agencies, such as USTR and the Department of
Commerce, noted that the intellectual property community was small and
that all involved were very familiar with the relevant policy officials
at other agencies in Washington, D.C. One U.S. government official
said, "No one is shy about picking up the phone." Further, State
Department officials at U.S. embassies also regularly communicate with
Washington, D.C. agencies regarding IPR matters and U.S. government
actions. Agency officials noted that this type of coordination is
central to pursuing U.S. intellectual property goals overseas.
Although communication between policy and law enforcement agencies can
occur through forums such as the NIPLECC, these agencies do not share
specific information about law enforcement activities systematically.
According to an FBI official, once a criminal investigation begins,
case information stays within the law enforcement agencies and is not
shared. A Justice official emphasized that criminal enforcement is
fundamentally different from the activities of policy agencies and that
restrictions exist on Justice's ability to share investigation
information, even with other U.S. agencies. Law enforcement agencies
share investigation information with other agencies on an "as-needed"
basis, and a USTR official said that there is no systematic means for
obtaining information on law enforcement cases with international
implications. An official at USPTO commented that coordination between
policy and law enforcement agencies should be "tighter" and that both
policy and law enforcement could benefit from improved communication.
For example, in helping other countries draft IPR laws, policy
officials could benefit from information on potential law enforcement
obstacles identified by law enforcement officials.
Officials at the Department of State and USTR identified some formal
and informal ways that law enforcement information may be incorporated
into policy discussions and activities. They noted that enforcement
agencies such as Justice and DHS participate in the formal Special 301
review and that officials at embassies or policy agencies consult and
make use of the publicly available DHS seizure data on IPR-violating
products.[Footnote 54] For example, a USTR official told us that USTR
had raised seizures at U.S. borders in bilateral discussions with the
Chinese. Discussions addressed time-series trends, both on an absolute
and percentage basis, for the overall seizure figures available from
DHS. This official noted that the agency will generally raise seizure
figures with a foreign country if that country is a major violator, has
consistently remained near the top of the list of:
violators, and/or has increasingly been the source of seized
goods.[Footnote 55] In addition, a Justice official noted that the
department increasingly engages in policy activities, such as the
Special 301 annual review and the negotiation of free trade agreements,
as well as training efforts, to improve coordination between policy and
law enforcement agencies and to strengthen international IPR
enforcement.
U.S. Government Faces Challenges to Further Progress:
The impact of U.S. activities is challenged by numerous factors. For
example, internally, competing U.S. policy objectives can affect how
much the U.S. government can accomplish. Beyond internal factors, the
willingness of a foreign country to cooperate in improving its IPR is
affected by that country's domestic policy objectives and economic
interests, which may complement or conflict with U.S. objectives. In
addition, many economic factors, including low barriers to entering the
counterfeiting and piracy business and large price differences between
legitimate and fake goods as well as problems such as organized crime,
pose challenges to U.S. and foreign governments' efforts, even in
countries where the political will for protecting intellectual property
exists.
U.S. Government Faces Internal Constraints:
Because intellectual property protection is one among many objectives
that the U.S. government pursues overseas, it is viewed in the context
of broader U.S. foreign policy interests where other objectives may
receive a higher priority at certain times in certain countries.
Industry officials with whom GAO met noted, for example, their belief
that policy priorities related to national security were limiting the
extent to which the United States undertook activities or applied
diplomatic pressure related to IPR issues in some countries. Officials
at the Department of Justice and the FBI also commented that
counterterrorism, not IPR, is currently the key priority for law
enforcement. Further, although industry is supportive of U.S. efforts,
many industry representatives commented that U.S. agencies need to
increase the resources available to better address IPR issues overseas.
Lack of Support in Foreign Countries Can Limit U.S. Efforts' Impact:
The impact of U.S. activities is affected by a country's own domestic
policy objectives and economic interests, which may complement or
conflict with U.S. objectives. U.S. efforts are more likely to be
effective in encouraging government action or achieving impact in a
foreign country if support for intellectual property protection exists
there. Groups in a foreign country whose interests align with that of
the United States can bolster U.S. efforts. For example, combating
music piracy in Brazil has gained political attention and support
because Brazil has a viable domestic music industry and thus has
domestic interests that have become victims of widespread piracy.
Further, according to a police official in Rio de Janeiro, efforts to
crack down on street vendors are motivated by the loss of tax revenues
from the informal economy. The unintended effect of these local
Brazilian efforts has been a crackdown on counterfeiting activities
because the informal economy is often involved in selling pirated and
counterfeit goods on the streets. Likewise, the Chinese government has
been working with a U.S. pharmaceutical company on medicines safety
training to reduce the amount of fake medicines produced in China (see
fig. 3).
Figure 3: Counterfeit and Legitimate Chinese Pharmaceutical Products:
[See PDF for image]
[End of figure]
However, U.S. efforts are less likely to achieve impact if no such
domestic support exists in other nations. Although U.S. options such as
removing trade preference program benefits, considering trade
sanctions, or visibly publicizing weaknesses in foreign IPR protection
can provide incentives for increased protection of IPR, such policies
may not be sufficient alone to counter existing incentives in foreign
countries. In addition, officials in some countries view providing
strong intellectual property protection as an impediment to
development. A Commission on Intellectual Property Rights (established
by the British government) report points out that strong IPR can allow
foreign firms selling to developing countries to drive out domestic
competition by obtaining patent protection and to service the market
through imports rather than domestic manufacture, or that strong
intellectual property protection increases the costs of essential
medicines and agricultural inputs, affecting poor people and farmers
particularly negatively. A lack of "political will" to enact IPR
protections makes it difficult for the U.S. government to achieve
impact in locations where a foreign government maintains such
positions.
Economic Factors and Involvement of Organized Crime Pose Additional
Challenges:
Many economic factors complicate and challenge U.S. and foreign
governments' efforts, even in countries where the political will for
protecting intellectual property exists. These factors include low
barriers to entering the counterfeiting and piracy business and
potentially high profits for producers. For example, one industry
pointed out that it is much more profitable to buy and resell software
than to sell cocaine. In addition, the low prices of fake products are
attractive to consumers. The economic incentives can be especially
acute in countries where people have limited income. Moreover,
technological advances allowing for high-quality inexpensive and
accessible reproduction and distribution in some industries have
exacerbated the problem. Further, many government and industry
officials also believe the chance of getting caught for counterfeiting
and piracy, as well as the penalties even if caught, are too low. For
example, FBI officials pointed out that domestic enforcement of
intellectual property laws has been weak, and consequently the level of
deterrence has been inadequate. These officials said that criminal
prosecutions and serious financial penalties are necessary to deter
intellectual property violations.
The increasing involvement of organized crime in the production and
distribution of pirated products further complicates enforcement
efforts. Federal and foreign law enforcement officials have linked
intellectual property crime to national and transnational organized
criminal operations. According to the Secretary General of Interpol,
intellectual property crime is now dominated by criminal organizations,
and law enforcement authorities have identified some direct and some
alleged links between intellectual property crime and paramilitary and
terrorist groups.[Footnote 56] Justice Department officials noted that
they are aware of the allegations linking intellectual property crime
and terrorist funding and that they are actively exploring all
potential avenues of terrorist financing, including through
intellectual property crime. However, to date, U.S. law enforcement has
not found solid evidence that intellectual property has been or is
being pirated in the United States by or for the benefit of terrorists.
The involvement of organized crime increases the sophistication of
counterfeiting operations, as well as the challenges and threats to law
enforcement officials confronting the violations. Moreover, according
to officials in Brazil, organized criminal activity surrounding
intellectual property crime is linked with official corruption, which
can pose an additional obstacle to U.S. and foreign efforts to promote
enhanced enforcement.
Many of these challenges are evident in the optical media industry,
which includes music, movies, software, and games. Even in countries
where interests exist to protect domestic industries, such as the
domestic music industry in Brazil or the domestic movie industry in
China, economic and law enforcement challenges can be difficult to
overcome. For example, the cost of reproduction technology and copying
digital media is low, making piracy an attractive employment
opportunity, especially in a country where formal employment is hard to
obtain. According to the Business Software Alliance, a CD recorder is
relatively inexpensive (less than $1,000). The huge price differentials
between pirated CDs and legitimate copies also create incentives on the
consumer side. For example, when we visited a market in Brazil, we
observed that the price for a legitimate DVD was approximately ten
times the price for a pirated DVD. Even if consumers are willing to pay
extra to purchase the legitimate product, they may not do so if the
price differences are too great for similar products. We found that
music companies have experimented with lowering the price of legitimate
CDs in Russia and Ukraine.[Footnote 57] A music industry representative
in Ukraine told us that this strategy is intended to make legitimate
products really affordable to consumers. However, whether this program
is successful in gaining market share and reducing sales of pirated CDs
is unclear. During our visit to a large Russian marketplace, a vendor
encouraged us to purchase a pirated CD despite the fact that she also
had the same CD for sale under the legitimate reduced-price program.
Further, the potentially high profit makes optical media piracy an
attractive venture for organized criminal groups. Industry and
government officials have noted criminal involvement in optical media
piracy and the resulting law enforcement challenges.
Recent technological advances have also exacerbated optical media
piracy. The mobility of the equipment makes it easy to transport it to
another location, further complicating enforcement efforts. Industry
and government officials described this phenomenon as the "whack-a-
mole" problem,[Footnote 58] noting that when progress is made in one
country, piracy operations often simply move to a neighboring location.
According to a Ukraine official, many production facilities moved to
Russia after Ukraine started closing down CD plants. These economic
incentives and technological developments have resulted in particularly
high rates of piracy in the optical media sector. Likewise, the
Internet provides a means to transmit and sell illegal software or
music on a global scale. According to an industry representative, the
ability of Internet pirates to hide their identities or operate from
remote jurisdictions often makes it difficult for IPR holders to find
them and hold them accountable.
Conclusions:
To seek improved protection of U.S. intellectual property in foreign
countries, U.S. agencies make use of a wide array of tools and
opportunities, ranging from routine discussions with foreign government
officials, to trade sanctions, to training and technical assistance, to
presidential-level dialogue. The U.S. government has demonstrated a
commitment to addressing IPR issues in foreign countries using multiple
agencies and U.S. embassies overseas. However, law enforcement actions
are more restricted than other U.S. activities, owing to factors such
as a lack of jurisdiction overseas to enforce U.S. law. U.S. agencies
and industry communicate regularly, and industry provides important
support for various agency activities.
Although the results of U.S. efforts to secure improved intellectual
property protection overseas often cannot be precisely identified, the
U.S. government is clearly and consistently engaged in this area and
has had a positive impact. Agency and industry officials have cited the
Special 301 review most frequently as the U.S. government tool that has
facilitated IPR improvements overseas. The effects of U.S. actions are
most evident in strengthened foreign IPR legislation and new
international obligations. Industry clearly supports U.S. efforts,
recognizing that they have contributed to improvements such as
strengthened IPR laws overseas. U.S. efforts are now focused on
enforcement, since effective enforcement is often the weak link in
intellectual property protection overseas and the situation is
deteriorating for some industries.
Several IPR coordination mechanisms exist, with the interagency
coordination that occurs during the Special 301 process standing out as
the most significant and active. Of note, the Training Coordination
Group is a completely voluntary effort and is generally cited as a
positive development. Further, the database created by this group is
useful, although it remains incomplete. Conversely, the mechanism for
coordinating intellectual property law enforcement, NIPLECC, has
accomplished little that is concrete. Currently, little compelling
information demonstrates a unique role for this group, bringing into
question its effectiveness. In addition, it does not include the FBI, a
primary law enforcement agency. Members, including NIPLECC leadership,
have repeatedly acknowledged that the group continues to struggle to
find an appropriate mission.
As agencies continue to pursue IPR improvements overseas, they will
face daunting challenges. These challenges include the need to create
political will overseas, recent technological advancements that
facilitate the production and distribution of counterfeit and pirated
goods, and powerful economic incentives for both producers and
consumers, particularly in developing countries. Further, as the U.S.
government focuses increasingly on enforcement, it will face different
and complex factors, such as organized crime, that may prove quite
difficult to address.
Matter for Congressional Consideration:
Because the authorizing legislation for the National Intellectual
Property Law Enforcement Coordination Council (NIPLECC) does not
clearly define the council's mission, NIPLECC has struggled to
establish its purpose and unique role. If the Congress wishes to
maintain NIPLECC and take action to increase its effectiveness, the
Congress may wish to consider reviewing the council's authority,
operating structure, membership, and mission. Such consideration could
help the NIPLECC identify appropriate activities and operate more
effectively to coordinate intellectual property law enforcement issues.
Agency Comments:
We received technical comments from USTR, the Departments of State,
Justice, and Homeland Security, the Copyright Office, and USITC. We
incorporated these comments into the report as appropriate. We also
received formal comment letters from the Department of Commerce (which
includes comments from USPTO), the Department of Homeland Security, and
USAID. USAID raised concerns regarding our findings on the agency's
contribution to an online IPR training database. No agency disagreed
with our overall findings and conclusions, though all suggested several
wording changes and/or additions to improve the report's completeness
and accuracy. The FBI provided no comments on the draft report.
As arranged with your offices, unless you publicly announce the
contents earlier, we plan no further distribution of this report until
30 days after the date of this letter. At that time, we will send
copies of this report to other interested committees. We will also
provide copies to the Secretaries of State, Commerce, and Homeland
Security; the Attorney General; the U.S. Trade Representative; the
Director of the Federal Bureau of Investigation; the Director of the
U.S. Patent and Trademark Office; the Register of Copyrights; the
Administrator of the U.S. Agency for International Development; and the
Chairman of the U.S. International Trade Commission. We will make
copies available to other interested parties upon request.
If you or your staff have any questions regarding this report, please
call me at (202) 512-4128. Other GAO contacts and staff acknowledgments
are listed in appendix XI.
Loren Yager:
Director, International Affairs and Trade:
[End of section]
Appendixes:
Appendix I: Objectives, Scope, and Methodology:
The Chairmen of the House Committees on Government Reform,
International Relations, and Small Business requested that we review
U.S. government efforts to improve intellectual property protection
overseas. This report addresses (1) the specific efforts that U.S.
agencies have undertaken; (2) the impact, and industry views, of these
actions; (3) the means used to coordinate these efforts; and (4) the
challenges that these efforts face in generating their intended impact.
To describe agencies' efforts, as well as the impact of these efforts,
we analyzed key U.S. government intellectual property reports, such as
the annual "Special 301" reports for the years 1994 through 2004, and
reviewed information available from databases such as the State
Department's intellectual property training database and the Department
of Homeland Security's online database of counterfeit goods seizures.
To assess the reliability of the online Department of Homeland Security
seizure data [Hyperlink,
http://www.cbp.gov/xp/cgov/import/commercial_enforcement/ipr/seizure/],
we interviewed the officials responsible for collecting the data and
performed reliability checks on the data. Although we found that the
agency had implemented a number of checks and controls to ensure the
data's reliability, we also noted some limitations in the precision of
the estimates. However, we determined that the data were sufficiently
reliable to provide a broad indication of the major products seized and
the main country from which the seized imports originated. Our review
of the reliability of the State Department's training database is
described below as part of our work to review agency coordination.
While we requested a comprehensive listing of countries assessed and
GSP benefits removed due to IPR problems, USTR was unable to provide
us with such data because this information is not regularly collected.
We met with officials from the Departments of State, Commerce, Justice,
and Homeland Security; the Office of the U.S. Trade Representative
(USTR); the U.S. Patent and Trademark Office (USPTO); the Copyright
Office; the Federal Bureau of Investigation (FBI); the U.S.
International Trade Commission (USITC); and the U.S. Agency for
International Development (USAID). We also met with officials from the
following industry groups that address intellectual property issues:
the International Intellectual Property Alliance, the International
AntiCounterfeiting Coalition, the Motion Picture Association of
America, the Recording Industry Association of America, the
Entertainment Software Association, the Association of American
Publishers, the Software and Information Industry Association, the
International Trademark Association, the Pharmaceutical Research and
Manufacturers of America, and the National Association of
Manufacturers. We reviewed reports and testimonies that such groups had
prepared. In addition, we attended a private sector intellectual
property rights enforcement conference and a U.S. government training
session sponsored by USPTO and the World International Property
Organization (WIPO). We met with officials from the World Trade
Organization (WTO) and WIPO in Geneva, Switzerland, to discuss their
interactions with U.S. agency officials.
We reviewed literature modeling trade damages due to intellectual
property violations and, in particular, examined the models used to
estimate such losses in Ukraine, which has been subject to U.S. trade
sanctions since 2002. We met with officials to discuss the
methodologies and processes employed in the Ukraine sanction case. To
identify the impact of trade sanctions against Ukraine, we studied the
U.S. overall imports from Ukraine as well as imports of commodities on
the sanction list from Ukraine from 2000 to 2003.
Finally, to verify information provided to us by industry and agency
officials and obtain detailed examples of U.S. government actions
overseas and the results of those actions, we traveled to four
countries where serious IPR problems have been identified--Brazil,
China, Russia, and Ukraine--and where the U.S. government has taken
measures to address these problems. We met with U.S. embassy and
foreign government officials and with U.S. companies and industry
groups operating in those countries. To choose the case study
countries, we evaluated countries according to a number of criteria
that we established, including the extent of U.S. government
involvement; the economic significance of the country and seriousness
of the intellectual property problem; the coverage of key intellectual
property areas (patent, copyright, and trademark) and industries (e.g.,
optical media, pharmaceuticals); and agency and industry association
recommendations. We collected and reviewed U.S. government and industry
documents in these countries.
To describe and assess the coordination mechanisms for U.S. efforts to
address intellectual property rights (IPR) overseas, we identified
formal coordination efforts (mandated by law, created by executive
decision, or occurring and documented on a regular basis) and reviewed
documents describing agency participation, mission, and activities. We
interviewed officials from agencies participating in the Special 301
subcommittee of the Trade Policy Staff Committee, the National
Intellectual Property Law Enforcement Coordination Council, the IPR
Training Coordination Group, and the IPR Center. While USTR did provide
GAO with a list of agencies that participated in Special 301
subcommittee meetings during the 2004 review, USTR officials requested
that we not cite this information in our report on the grounds that
this information is sensitive. USTR asked that we instead list all the
agencies that are invited to participate in the TPSC process, though
agency officials acknowledged that, based upon their own priorities,
not all agencies actually participate. We also met with officials from
intellectual property industry groups who participate in the IPR
Training Coordination Group and who are familiar with the other agency
coordination efforts. We attended a meeting of the IPR Training
Coordination Group to witness its operations, and we visited the IPR
Center. To further examine the coordination of agency training efforts,
we conducted a data reliability assessment of the IPR Training Database
[Hyperlink, http://www.training.ipr.gov] to determine whether it
contained an accurate and complete record of past and planned training
events. To assess the completeness and reliability of the training data
in the database, we spoke with officials at the Department of State
about the management of the database and with officials at the agencies
about the entering of the data in the database. We also conducted
basic tests of the data's reliability, including checking to see
whether agencies input information related to training events in the
database and information appeared accurate. We assessed the
reliability of these data to determine how useful they are to the
agencies that provide IPR training, not because we wanted to include
them in this report. As noted on pages 34 and 35, we determined that
these data had some problems of timeliness and completeness, which
limited their usefulness. Finally, we compared the data with documents
containing similar information, provided by some of the agencies, to
check the data's consistency. To identify other forms of coordination,
we spoke with U.S. agency officials about informal coordination and
communication apart from the formal coordination bodies cited above.
To identify the challenges that agencies' activities face in generating
their intended impact, we spoke with private sector and embassy
personnel in the case study countries about political and economic
circumstances relevant to intellectual property protection and the
impact of these circumstances on U.S. activities. We also spoke with
law enforcement personnel at the Departments of Justice and Homeland
Security, the FBI, and foreign law enforcement agencies in Washington,
D.C., and our case study countries about the challenges they face in
combating intellectual property crime overseas. We visited markets in
our case study countries where counterfeit and pirated merchandise is
sold to compare local prices for legitimate and counterfeit products
and to confirm (at times with industry experts present) that
counterfeit goods are widely and easily available. We reviewed embassy
cables, agency and industry reports, and congressional testimony
provided by agency, industry, and overseas law enforcement officials
documenting obstacles to progress in IPR protection around the world.
We reviewed studies and gathered information at our interviews on the
arguments for and against IPR protection in developing countries.
In addition to the general discussion, we chose the optical media
sector to illustrate the challenges facing antipiracy efforts. To
identify the challenges, we interviewed industry representatives from
the optical media sector both in the United States and overseas
regarding their experiences in fighting piracy. We reviewed Special 301
reports and industry submissions to study the optical media piracy
levels over the years. In Brazil, Russia, and Ukraine, we recorded the
prices of legal and illegal music CDs, movies, and software at local
markets.
We used U.S. overall imports and import of the products on the sanction
list from Ukraine. The source of the overall import data is the U.S.
Bureau of the Census, and the source of the import data of the products
on the sanction list is the Trade Policy Information System (TPIS), a
Web site operated by the Department of Commerce. In order to assess the
reliability of the overall import data, we (1) reviewed "U.S.
Merchandise Trade Statistics: A Quality Profile" by the Bureau of the
Census and (2) discussed the data with the Chief Statistician at GAO.
We determined the data to be sufficiently reliable for our purpose,
which was to track the changes in U.S. overall imports from Ukraine
from 2000 through 2003. In order to assess the reliability of the data
from TPIS, we did internal checks on the data and checked the data
against a Bureau of the Census publication. We determined the data to
be sufficiently reliable for our purpose, which was to track changes in
U.S. imports from Ukraine of the goods on the sanction list.
We conducted our work in Washington, D.C; Geneva, Switzerland;
Brasilia, Rio de Janeiro, and Sao Paolo, Brazil; Beijing, China;
Moscow, Russia; and Kiev, Ukraine, from June 2003 through July 2004, in
accordance with generally accepted government auditing standards.
[End of section]
Appendix II: Trade Agreements Negotiated Since 1990 That Address IPR,
and the WTO Membership Status for Countries Involved:
Trade agreements[A]: IPR agreements/understandings: Bahamas Letter of
Understanding on the Copyright Act and Regulations;
Year: 2000;
WTO status: IPR agreements/understandings: N.
Trade agreements[A]: IPR agreements/understandings: Bulgaria IPR
Agreement;
Year: 1994;
WTO status: 1996.
Trade agreements[A]: IPR agreements/understandings: Croatia IPR MOU;
Year: 1998;
WTO status: 2000.
Trade agreements[A]: IPR agreements/understandings: Ecuador IPR
Agreement;
Year: 1993;
WTO status: 1996.
Trade agreements[A]: IPR agreements/understandings: Hungary IPR
Agreement;
Year: 1993;
WTO status: 1995.
Trade agreements[A]: IPR agreements/understandings: India IPR
Agreement;
Year: 1993;
WTO status: 1995.
Trade agreements[A]: IPR agreements/understandings: Jamaica IPR
Agreement;
Year: 1994;
WTO status: 1995.
Trade agreements[A]: IPR agreements/understandings: Japan Mutual
Understanding on IPR;
Year: IPR agreements/understandings: 1994;
WTO status: 1995.
Trade agreements[A]: IPR agreements/understandings: Japan Mutual
Understanding on IPR;
Year: IPR agreements/understandings: 1994;
WTO status: 1995.
Trade agreements[A]: IPR agreements/understandings: Korea Exchange of
Letters on Pipeline Protection; Year: 1990;
WTO status: 1995.
Trade agreements[A]: IPR agreements/understandings: Korea Exchange of
Letters on Data Protection;
Year: 2002;
WTO status: 1995.
Trade agreements[A]: IPR agreements/understandings: Nicaragua IPR
Agreement;
Year: 1997;
WTO status: 1995.
Trade agreements[A]: IPR agreements/understandings: Paraguay IPR MOU;
Year: 1998;
WTO status: 1995.
Trade agreements[A]: IPR agreements/understandings: PRC MOU on IP
Protection;
Year: 1992;
WTO status: 2001.
Trade agreements[A]: IPR agreements/understandings: PRC Agreement on
IP Protection;
Year: IPR agreements/understandings: 1995;
WTO status: 2001.
Trade agreements[A]: IPR agreements/understandings: PRC Report on
Measures to Enforce IP Protection;
Year: 1996;
WTO status: 2001.
Trade agreements[A]: IPR agreements/understandings: Peru IPR MOU;
Year: 1997;
WTO status: 1995.
Trade agreements[A]: IPR agreements/understandings: Philippines
Protection and Enforcement of IPR; Year: 1993;
WTO status: 1995.
Trade agreements[A]: IPR agreements/understandings: Sri Lanka IPR
Agreement;
Year: 1991;
WTO status: 1995.
Trade agreements[A]: IPR agreements/understandings: Taiwan - Agreement
on IP Protection;
Year: IPR agreements/understandings: 1992;
WTO status: 2002.
Trade agreements[A]: IPR agreements/understandings: Taiwan - Agreement
on IP Protection (Trademark); Year: 1993;
WTO status: 2002.
Trade agreements[A]: IPR agreements/understandings: Taiwan - Agreement
on IP Protection (Copyright); Year: 1993;
WTO status: 2002.
Trade agreements[A]: IPR agreements/understandings: Thailand IPR
Agreement;
Year: 1991;
WTO status: 1995.
Trade agreements[A]: IPR agreements/understandings: Trinidad and
Tobago IPR Agreement;
Year: IPR agreements/understandings: 1994;
WTO status: 1995.
Trade agreements[A]: IPR agreements/understandings: Vietnam
Establishment of Copyright Relations Agreement;
Year: 1997;
WTO status: IPR agreements/understandings: N.
Trade agreements[A] with IPR provisions: Albania Trade Relations
Agreement;
Year: IPR agreements/understandings: 1992;
WTO status: 2000.
Trade agreements[A] with IPR provisions: Armenia Trade Relations
Agreement;
Year: IPR agreements/understandings: 1992;
WTO status: 2003.
Trade agreements[A] with IPR provisions: Azerbaijan Trade Relations
Agreement;
Year: IPR agreements/understandings: 1995;
WTO status: N.
Trade agreements[A] with IPR provisions: Belarus Trade Relations
Agreement;
Year: IPR agreements/understandings: 1993;
WTO status: N.
Trade agreements[A] with IPR provisions: Bulgaria Agreement on Trade
Relations;
Year: IPR agreements/understandings: 1991;
WTO status: 1996.
Trade agreements[A] with IPR provisions: Cambodia Trade Relations and
IPR Agreement;
Year: IPR agreements/understandings: 1996;
WTO status: N.
Trade agreements[A] with IPR provisions: Czech Republic Trade
Relations Agreement;
Year: IPR agreements/understandings: 1990;
WTO status: 1995.
Trade agreements[A] with IPR provisions: Georgia Trade Relations
Agreement;
Year: IPR agreements/understandings: 1993;
WTO status: 2000.
Trade agreements[A] with IPR provisions: Kazakhstan Trade Relations
Agreement;
Year: IPR agreements/understandings: 1993;
WTO status: N.
Trade agreements[A] with IPR provisions: Kyrgyzstan Trade Relations
Agreement;
Year: IPR agreements/understandings: 1992;
WTO status: 1998.
Trade agreements[A] with IPR provisions: Latvia Trade and IPR
Agreement;
Year: IPR agreements/understandings: 1995;
WTO status: 1999.
Trade agreements[A] with IPR provisions: Moldova Agreement on Trade
Relations;
Year: IPR agreements/understandings: 1992;
WTO status: 2001.
Trade agreements[A] with IPR provisions: Mongolia Trade Relations
Agreement;
Year: IPR agreements/understandings: 1991;
WTO status: 1997.
Trade agreements[A] with IPR provisions: Panama Trade Relations
Agreement;
Year: IPR agreements/understandings: 1994;
WTO status: 1997.
Trade agreements[A] with IPR provisions: Poland Business and Economic
Treaty;
Year: IPR agreements/understandings: 1994;
WTO status: 1995.
Trade agreements[A] with IPR provisions: Romania Agreement on Trade
Relations;
Year: IPR agreements/understandings: 1992;
WTO status: 1995.
Trade agreements[A] with IPR provisions: Russia Trade Relations
Agreement;
Year: IPR agreements/understandings: 1992;
WTO status: N.
Trade agreements[A] with IPR provisions: Slovakia Trade Relations
Agreement;
Year: IPR agreements/understandings: 1990;
WTO status: 1995.
Trade agreements[A] with IPR provisions: Tajikistan Trade Relations
Agreement;
Year: IPR agreements/understandings: 1993;
WTO status: N.
Trade agreements[A] with IPR provisions: Turkmenistan Agreement on
Trade Relations;
Year: IPR agreements/understandings: 1993;
WTO status: N.
Trade agreements[A] with IPR provisions: Ukraine Trade Relations
Agreement;
Year: IPR agreements/understandings: 1992;
WTO status: N.
Trade agreements[A] with IPR provisions: Uzbekistan Trade Relations
Agreement;
Year: IPR agreements/understandings: 1994;
WTO status: N.
Trade agreements[A] with IPR provisions: Vietnam Trade Relations
Agreement;
Year: IPR agreements/understandings: 2001;
WTO status: N.
Trade agreements[A]: Free trade agreements (FTAs): Chile FTA;
Year: 2003;
WTO status: 1995.
Trade agreements[A]: Free trade agreements (FTAs): Jordan FTA;
Year: 2001;
WTO status: 2000.
Trade agreements[A]: Free trade agreements (FTAs): North American FTA
(Mexico and Canada);
Year: IPR agreements/understandings: 1994;
WTO status: 1995.
Trade agreements[A]: Free trade agreements (FTAs): Singapore FTA;
Year: 2003;
WTO status: 1995.
Legend:
IPR: intellectual property rights:
MOU: memorandum of understanding:
PRC: People's Republic of China:
N: Not a member of the WTO:
Source: GAO, based on Department of Commerce and USTR data.
[A] Includes only in-force agreements:
[End of table]
[End of section]
Appendix III: WTO TRIPS Dispute Settlement Cases Brought by the U.S.
Government:
Since the implementation of the WTO Agreement on Trade-Related Aspects
of Intellectual Property (TRIPS) in 1996, the United States has brought
a total of 12 TRIPS-related cases against 11 countries and the European
Community (EC) to the WTO through that organization's dispute
settlement mechanism (see below). Of these, 8 cases were resolved by
mutually agreed solutions. In nearly all of these cases, U.S. concerns
were addressed via changes in laws or regulations by the other party.
Only 2 (involving Canada and India) have resulted in the issuance of a
panel report, both of which were favorable rulings for the United
States.[Footnote 59] Consultations are ongoing in one additional case,
against Argentina, and this case has been partially settled. One case,
involving an EC regulation protecting geographical indications, has
gone beyond consultations and is in WTO dispute settlement panel
proceedings.
1. Argentina: pharmaceutical patents --Brought by U.S., DS171 and
DS196 Case originally brought by the United States in May 1999.
Consultations ongoing, although 8 of 10 originally disputed issues have
been resolved.
2. Brazil: "local working" of patents and compulsory licensing --
Brought by U.S., DS199 Case originally brought by the United States in
June 2000. Settled between the parties in July 2001. Brazil agreed to
hold talks with the United States prior to using the disputed article
against a U.S. company.
3 .Canada: term of patent protection --Brought by U.S., DS170 Case
originally brought by the United States in May 1999. Panel report
issued in May 2000 decided for the United States, (WT/DS170/R) later
upheld by Appellate Body report. According to USTR, Canada announced
implementation of a revised patent law on July 24, 2001.
4. Denmark: enforcement, provisional measures, civil proceedings -
-Brought by U.S., DS83 Case originally brought by United States in May
1997. Settled between the parties in June 2001. In March 2001, Denmark
passed legislation granting the relevant judicial authorities the
authority to order provisional measures in the context of civil
proceedings involving the enforcement of intellectual property rights.
5. EC: trademarks and geographical indications --Brought by U.S.,
DS174 Case originally brought by U.S. in June 1999. WTO panel
proceedings are ongoing.
6. Greece and EC: motion pictures, TV, enforcement --Brought by
U.S., DS124 and DS125 Case originally brought by the United States in
May 1998. Greece passed a law in October 1998 that provided an
additional enforcement remedy for copyright holders whose rights were
infringed upon by TV stations in Greece. Based on the implementation of
this law, the case was settled between the parties in March 2001.
7. India: patents, "mailbox," exclusive marketing --Brought by EC,
DS79 --Brought by U.S., DS50 Case originally brought by the United
States in July 1996. Panel report issued in September 1997 decided for
the United States (WT/DS50/R).
8. Ireland and EC: copyright and neighbouring rights --Brought by
U.S., DS82 and DS115 Case originally brought by the United States in
May 1997. Settled between the parties in November 2000. Ireland passed
a law and amended its copyright law in ways that satisfied U.S.
concerns.
9. Japan: sound recordings intellectual property protection --
Brought by EC DS42 --Brought by U.S., DS28 Case originally brought
by the United States in February 1996. Settled between the parties in
January 1997. Japan passed amendments to its copyright law that
satisfied U.S. concerns.
10. Pakistan: patents, "mailbox," exclusive marketing --Brought by
U.S., DS36 Case originally brought by the United States in May 1996.
Settled between the parties in February 1997. Pakistan issued rulings
with respect to the filing and recognition of patents that satisfied
U.S. concerns.
11. Portugal: term of patent protection --Brought by U.S., DS37
Case originally brought by the United States in May 1996. Settled
between the parties in October 1996. Portugal issued a law addressing
terms of patent protection in a way that satisfied U.S. concerns.
12. Sweden: enforcement, provisional measures, civil proceedings -
-Brought by U.S., DS86 Case originally brought by the United States in
June 1997. Settled between the parties in December 1998. In November
1998, Sweden passed legislation granting the relevant judicial
authorities the authority to order provisional measures in the context
of civil proceedings involving the enforcement of intellectual property
rights.
[End of section]
Appendix IV: Country Case Study: Brazil:
The State of IPR in Brazil:
Brazil is generally credited with having adequate laws to protect
intellectual property, but the enforcement of these laws remains a
problem. Officials we interviewed in Brazil identified several reasons
for the weak enforcement, including insufficient and poorly trained
police and a judiciary hampered by a lack of resources, inefficiencies
and, in some cases, corruption. Most broadly, they cited the weak
economy and lack of formal sector employment as reasons for the
widespread sale and consumption of counterfeit goods. One Brazilian
official commented that the current intellectual property protection
system has generated large price gaps between legitimate and
illegitimate products, making it very difficult to combat illegitimate
products. However, private sector officials also pointed to high tax
rates on certain goods as a reason for counterfeiting. Regardless, the
sale of counterfeit merchandise abounds. One market in Sao Paulo that
we visited covered many city blocks and was saturated with counterfeit
products. For example, we identified counterfeit U.S. products such as
Nike shoes, Calvin Klein perfume, and DVDs of varying quality. The
market not only sold counterfeit products to the individual consumer,
but many vendors also served as "counterfeit wholesalers" who offered
even cheaper prices for purchasing counterfeit sunglasses in bulk, for
example. According to industry representatives, this market also has
ties to organized crime.
Private and public sector officials identified two significant
challenges to Brazil's improving its intellectual property protection:
establishing better border protection, particularly from Paraguay--a
major source of counterfeit goods--and a better-functioning National
Industrial Property Institute (INPI). The acting president of INPI
acknowledged that, owing to insufficient personnel, money, and space,
INPI is not functioning well and has an extremely long backlog of
patent and trademark applications. Two private sector representatives
commented that U.S. assistance to INPI could be very valuable. It can
currently take as long as 9 years to get a patent approved. Patent
problems have been exacerbated by an ongoing conflict between INPI and
the Ministry of Health over the authority to grant pharmaceutical
patents. A pharmaceutical industry association report claims that the
current system, which requires the Ministry of Health to approve all
pharmaceutical patents, is in violation of TRIPS.
U.S. Government Actions to Address Brazil's IPR Problems:
The U.S. government has been involved in various activities to promote
better enforcement of intellectual property rights in Brazil. Brazil
has been cited on the Special 301 Priority Watch List since 2002 and is
currently undergoing a review to determine whether it should remain
eligible for Generalized System of Preferences (GSP) benefits. In
recent years, Brazilian officials have participated in training offered
by USPTO in Washington, D.C., and have studied intellectual property
issues in depth in the United States as participants in U.S.-sponsored
programs. The Departments of State, Justice, and Homeland Security have
also sponsored or participated in training events or seminars on
different intellectual property issues. The Department of State's
public affairs division has also worked on public awareness events and
seminars.
Officials from industry associations representing American companies,
as well as officials from individual companies we met with, stated that
they are generally satisfied with U.S. efforts to promote the
protection of IPR in Brazil. Many had regular contact with embassy
personnel to discuss intellectual property issues, and several had
collaborated with U.S. agencies to develop and present seminars or
training events in Brazil that they believed were useful tools for
promoting IPR. The private sector officials we spoke with made some
suggestions for improving U.S.-sponsored assistance, including
consulting with the private sector earlier to identify appropriate
candidates for training. However, private and public sector officials
commented regularly on the usefulness of training activities provided
by the United States, and many expressed a desire for more of these
services. In particular, several officials expressed a hope that the
United States would provide training and technical assistance to INPI.
In February 2004, a senior Department of Commerce official discussed
collaboration and technical assistance matters with a Brazilian
minister, and USPTO staff recently traveled to Brazil to provide
training at INPI.
Overall, the direct impact of U.S. efforts was difficult to determine,
but U.S. involvement regarding IPR in Brazil was widely recognized.
Several industry and Brazilian officials we spoke with were familiar
with the Special 301 report; many in the private sector had contributed
to it via different mechanisms. One industry official commented that
the Special 301 process is helpful in convincing the Brazilian
authorities of the importance of intellectual property protection.
Others were less certain about whether the report had any impact. A
Brazilian minister stated that the United States is the biggest
proponent of IPR, although he did not believe that any particular U.S.
program had had a direct impact on Brazilian intellectual property laws
or enforcement. Others, however, believed that pressure from the U.S.
government lent more credibility to the private sector's efforts and
may have contributed to changes in Brazilian intellectual property
laws.
Changes in Brazil's IPR Protection:
Most private sector officials we spoke with agreed that the
government's interest in combating intellectual property crime has
recently increased. They noted that developments have included the work
of the Congressional Investigative Commission on Piracy (CPI) in the
Brazilian Congress and newly formed special police groups to combat
piracy. In addition, President Lula signed a law last year amending the
penal code with respect to copyright violations; minimum sentences were
increased to 2 years and now include a fine and provide for the seizure
and destruction of counterfeit goods. However, these increased
sanctions do not apply to software violations. According to an official
with the Brazilian special police, the Brazilian government was moved
to prosecute piracy more vigorously because government officials
realized that the growing informal economy was resulting in the loss of
tax revenue and jobs. However, a Brazilian state prosecutor and the CPI
cited corruption and the involvement of organized crime in intellectual
property violations as challenges to enforcement efforts.
[End of section]
Appendix V: Country Case Study: China:
The State of IPR in China:
China's protection of IPR has improved in recent years but remains an
ongoing concern for the U.S. government and the business community.
Upon accession to the WTO in December 2001, China was obligated to
adhere to the terms of the Agreement on Trade-Related Aspects of
Intellectual Property (TRIPS). According to the U.S. Trade
Representative's (USTR) 2003 review of China's compliance with its WTO
commitments, IPR enforcement was ineffective, and IPR infringement
continued to be a serious problem in China. USTR reported that lack of
coordination among Chinese government ministries and agencies, local
protectionism and corruption, high thresholds for criminal prosecution,
lack of training, and weak punishments hampered enforcement of IPR.
Piracy rates in China continue to be excessively high and affect
products from a wide range of industries. According to a 2003 report by
China's State Council's Development Research Center, the market value
of counterfeit goods in China is between $19 billion and $24 billion.
Various U.S. copyright holders also reported that estimated U.S. losses
due to the piracy of copyrighted materials have continued to exceed
$1.8 billion annually. Pirated products in China include films, music,
publishing, software, pharmaceuticals, chemicals, information
technology, consumer goods, electric equipment, automotive parts, and
industrial products, among many others. According to the International
Intellectual Property Alliance, a coalition of U.S. trade associations,
piracy levels for optical discs are at 90 percent and higher, almost
completely dominating China's local market. Furthermore, a U.S. trade
association reported that the pharmaceutical industry not only loses
roughly 10 to 15 percent of annual revenue in China to counterfeit
products, but counterfeit pharmaceutical products also pose serious
health risks.
U.S. Government Actions to Address China's IPR Problems:
Since the first annual Special 301 review in 1989, USTR has initiated
several Special 301 investigations on China's IPR protection. However,
since the conclusion of a bilateral IPR agreement with China in 1996,
China has not been subject to a Special 301 investigation but has
instead been subject to monitoring under Section 306.[Footnote 60] In
2004, USTR reviewed China's implementation under Section 306 and
announced that China would be subject to an out-of-cycle review in
2005. In addition to addressing China's IPR protection through these
statutory mechanisms, the U.S. government has been involved in various
efforts to protect IPR in China. The U.S. government's activities in
China are part of an interagency effort involving several agencies,
including USTR, State, Commerce, Justice, Homeland Security, USPTO, and
the Copyright Office. In 2003, U.S. interagency actions in China to
protect IPR included (1) engaging the Chinese government at various
levels on IPR issues; (2) providing training and technical assistance
for Chinese ministries, agencies, and other government entities on
various aspects of IPR protection; and (3) providing outreach and
assistance to U.S. businesses. Most private sector representatives we
met with in China said that they are generally satisfied with the U.S.
government's efforts in China but noted areas for potential
improvement.
In 2003, U.S. government engagement with China on IPR issues ranged
from high-level consultations with Chinese ministries to letters,
demarches, and informal meetings between staff-level U.S. officials and
their counterparts in the Chinese government. U.S. officials noted that
during various visits to China in 2003, the Secretaries of Commerce and
Treasury and the U.S. Trade Representative, as well as several
subcabinet level officials, urged their Chinese counterparts to develop
greater IPR protection. U.S. officials said that these efforts were
part of an overall strategy to ensure that IPR protection was receiving
attention at the highest levels of China's government. U.S. officials
also noted that the U.S. Ambassador to China has placed significant
emphasis on IPR protection. In 2002 and 2003, the U.S. government held
an Ambassador's Roundtable on IPR in China that brought together
representatives from key U.S. and Chinese agencies, as well as U.S. and
Chinese private sector representatives. U.S. officials said that China
Vice Premier Wu's involvement in the 2003 roundtable was an indication
that IPR was receiving attention at high levels of China's government.
One U.S. official stated that addressing pervasive systemic problems in
China, such as lack of IPR protection, is "nearly impossible unless it
stays on the radar at the highest levels" of the Chinese government.
A second key component of U.S. government efforts to ensure greater
protection of IPR in China involved providing numerous training
programs and technical assistance to Chinese ministries and agencies.
U.S. government outreach and capacity-building efforts included
sponsoring speakers, seminars, and training on specific technical
aspects of IPR protection to raise the profile and increase technical
expertise among Chinese officials. The U.S. government targeted other
programs to address the lack of criminalization of IPR violations in
China. For example, an interagency U.S. government team (Justice, DHS,
and Commerce) conducted a three-city capacity-building seminar in
October 2003 on criminalization and enforcement. The program was
cosponsored by the Chinese Procuratorate, the Chinese government's
prosecutorial arm. U.S. government officials noted that the program was
unique because the seminar brought together officials from Chinese
criminal enforcement agencies, including customs officials, criminal
investigators, and prosecutors, as well as officials from
administrative enforcement agencies. In March 2004, the Copyright
Office hosted a week-long program for a delegation of Chinese copyright
officials that provided technical assistance and training on copyright-
related issues, including the enforcement of copyright laws, as well as
outreach and relationship-building.
The U.S. government has also provided outreach regarding IPR protection
to U.S. businesses in China, and Commerce has played a lead role in
this effort. For example, in late 2002, Commerce established a Trade
Facilitation Office in Beijing to, among other things, provide
outreach, advocacy, and assistance to U.S. businesses on market access
issues, including IPR protection. Additionally, Foreign Commercial
Service officers in China work with U.S. firms to identify and resolve
cases of IPR infringement. Commerce officials indicated that increasing
private sector awareness and involvement in IPR issues are essential to
furthering IPR protection in China.
GAO's 2004 analysis of selected companies' views on China's
implementation of its WTO commitments reported that respondents ranked
IPR protection as one of the three most important areas of China's WTO
commitments but that most respondents thought China had implemented IPR
reforms only to some or little extent.[Footnote 61] In general, other
industry association and individual company representatives whom we
interviewed in China were satisfied with the range of U.S. government
efforts to protect IPR in China. Several industry representatives noted
that they had regular contact with officials from various U.S. agencies
in China and that the staff assigned to IPR issues were generally
responsive to their firm's or industry's needs. Private sector
representatives stated that the U.S. government's capacity-building
efforts were one of the most effective ways to promote IPR protection
in China. Some representatives noted that Chinese government entities
are generally very receptive to these types of training and
information-sharing programs. However, some private sector
representatives also said that the U.S. agencies could better target
the programs to the appropriate Chinese audiences and follow up more to
ensure that China implements the knowledge and practices disseminated
through the training programs. Most private sector representatives we
met with also said that the U.S. government efforts in China were
generally well coordinated, but they indicated that they were not
always able to determine which U.S. agency was leading the effort on a
specific issue.
Changes in China's IPR Protection:
Although Chinese laws are now, in principle, largely compliant with the
strict letter of the TRIPS agreement, U.S. government and other
industry groups note that there are significant gaps in the law and
enforcement policies that pose serious questions regarding China's
satisfaction of the TRIPS standards of effective and deterrent
enforcement. In 2003, USTR found that China's compliance with the TRIPS
agreement had been largely satisfactory, although some improvements
still needed to be made. Before its accession to the WTO, China had
completed amendments to its patent law, trademark law, and copyright
law, along with regulations for the patent law. Within several months
after its accession, China issued regulations for the trademark law and
copyright law. China also issued various sets of implementing rules,
and it issued regulations and implementing rules covering specific
subject areas, such as integrated circuits, computer software, and
pharmaceuticals.
China has taken some steps in administrative, criminal, and civil
enforcement against IPR violators. According to USTR's review, the
central government promotes periodic anticounterfeiting and antipiracy
campaigns as part of its administrative enforcement, and these
campaigns result in a high number of seizures of infringing materials.
However, USTR notes that the campaigns are largely ineffective; because
cases brought by the administrative authorities usually result in
extremely low fines, criminal enforcement has virtually no deterrent
effect on infringers. China's authorities have pursued criminal
prosecutions in a small number of cases, but the Chinese government
lacks the transparency needed to determine the penalties imposed on
infringers. Last, China has seen an increased use of civil actions
being brought for monetary damages or injunctive relief. This suggests
an increasing sophistication on the part of China's IPR courts, as
China continues to make efforts to upgrade its judicial system.
However, U.S. companies complain that the courts do not always enforce
China's IPR laws and regulations consistently and fairly.
Despite the overall lack of IPR enforcement in China, IPR protection is
receiving attention at high levels of the Chinese government. Notably,
in October 2003, the government created an IPR Leading Group, headed by
a vice premier, to address IPR protection in China. Several U.S.
government officials and private sector representatives told us that
high-level involvement by Vice Premier Wu would be critical to the
success of future developments in IPR protection in China. In April
2004, the United States pressed IPR issues with China during a formal,
cabinet-level consultative forum with China called the Joint Commission
of Commerce and Trade (JCCT). In describing the results of the April
2004 JCCT meeting, USTR reported that China had agreed to undertake a
number of near-term actions to address IPR protection. China's action
plan included increasing penalties for IPR infringement and launching a
public awareness campaign on IPR protection. Additionally, China and
the United States agreed to form an IPR working group under the JCCT to
monitor China's progress in implementing its action plan.
[End of section]
Appendix VI: Country Case Study: Russia:
The State of IPR in Russia:
Although the Russian government has demonstrated a growing recognition
of the seriousness of IPR problems in the country and has taken some
actions, serious problems persist. Counterfeiting and piracy are common
(see fig. 4). For example, a Microsoft official told us that
approximately 80 percent of business software is estimated as pirated
in Russia, and that the Russian government is a "huge" user of pirated
software. Further, the pharmaceutical industry estimates that up to 12
percent of drugs on the market in Russia are counterfeit. Of particular
note to the U.S. government, piracy of optical media (e.g., CDs, DVDs,
etc.) in Russia is rampant. According to an official from the Russian
Anti-Piracy Organization, as much as 95 percent of optical media
products produced in Russia are pirated. U.S. concern focuses on the
production of pirated U.S. optical media products by some or all of the
30 optical media production facilities in Russia, 17 of which are
located on Russian government-owned former defense sites where it has
been difficult for inspection officials to gain access (though,
according to an embassy official, access has recently improved).
According to a U.S. embassy official, Russian demand for optical media
products is estimated at 18 million units per year, but Russian
production is estimated to be 300 million units. U.S. Embassy and
private sector officials believe that the excess pirated products are
exported to other countries. Industry estimates losses of over $1
billion annually as a result of this illegal activity.
Figure 4: Counterfeit and Legitimate Russian Detergent:
[See PDF for image]
[End of figure]
Russia has made many improvements to its IPR legislation, but the U.S.
government maintains that more changes are needed. For example, the
2004 Special 301 report states that the Russian government is still
working to amend its laws on protection of undisclosed information--in
particular, protection for undisclosed test data submitted to obtain
marketing approval for pharmaceuticals and agricultural chemicals.
Further, U.S. industry and Russian officials view Russia's IPR
enforcement as inadequate and cite this as the largest deterrent to
effective IPR protection in Russia. For example, the 2004 Special 301
report emphasizes that border enforcement is considered weak and that
Russian courts do not have the authority in criminal cases to order
forfeiture and destruction of machinery and materials used to make
pirated and counterfeit products. Further, one Russian law enforcement
official told us that since IPR crimes are not viewed as posing much of
a social threat, IPR enforcement is "pushed to the background" by
Russian prosecutors.
U.S. Government Actions to Address Russia's IPR Problems:
The U.S. government has taken several actions in Washington, D.C., and
Moscow to address its concerns over Russia's failure to fully protect
IPR. Russia has been placed on USTR's Special 301 Priority Watch List
for the past 8 years (1997 through 2004). Further, a review of Russia's
eligibility under the Generalized System of Preferences (GSP) is
underway owing to concerns over serious IPR problems in the country.
The U.S. government has actively raised IPR issues with the Russian
government, including at the highest levels. According to the
Department of State, at a United States-Russia summit in September
2003, President Bush raised IPR concerns with Russian President Putin.
Further, in Moscow, the U.S. Ambassador to Russia considers IPR an
embassy priority and has sent letters to Russian government officials
and published articles in the Russian press that outline U.S.
government concerns.
Many agencies resident in the U.S. Embassy in Moscow are engaged in IPR
issues. The Department of State's Economic Section is the Embassy
office with primary responsibility for IPR issues. This office
collaborates closely with USTR and holds interagency embassy meetings
to coordinate on IPR efforts. In addition to interagency communication
through these meetings, each agency is also engaged in separate
efforts. For example, the Economic Section has met regularly with
Russian government officials to discuss IPR issues. Justice has held
two training events on IPR criminal law enforcement in 2004, and has
two more events planned for this year, while the Embassy's Public
Affairs Office is involved with IPR enforcement exchange and training
grants. Further, the Department of Commerce's Foreign Commercial
Service works with U.S. companies on IPR issues and sponsored a 2003
seminar on pharmaceutical issues, including IPR-related topics.
According to a Justice official, U.S. law enforcement agencies are
making efforts to build relationships with their Russian counterparts.
Industry representatives whom we interviewed in Moscow expressed
support for U.S. government efforts to improve intellectual property
protection, particularly the U.S. Ambassador's efforts to increase the
visibility of IPR problems. An official from one IPR association in
Moscow noted, with respect to USTR's efforts in Russia, "No other
country in the world is so protective of its copyright industries."
Industry representatives noted that the U.S. government has played an
important role in realizing IPR improvements in Russia, although the
Russian government is also clearly motivated to strengthen intellectual
property protections as part of its preparation for joining the World
Trade Organization. Further, U.S. Embassy staff believe that they have
been successful in ensuring that IPR is now firmly on the "radar
screen" of the Russian government.
Changes in Russia's IPR Protection:
According to U.S. sources, numerous IPR laws have been enacted. For
example, the Department of State has noted that the Russian government
has passed new laws on patents, trademarks, industrial designs, and
integrated circuits and has amended its copyright law. Further, U.S.
and Russian sources note that Russia has improved its customs and
criminal codes. Moreover, in 2002, the Russian government established a
high-level commission, chaired by the prime minister, specifically to
address intellectual property problems (although, despite a recognized
desire to address IPR enforcement, the commission has reportedly not
accomplished a great deal in terms of concrete achievements).
In addition to these promising improvements, there have been some signs
that enforcement is improving, if slowly. For example, the Russian
government issued a decree banning the sale of audio and video products
by Russian street vendors, and the U.S. Embassy has reported that
subsequently several kiosks known to sell pirated goods were closed.
Industry associations have reported that law enforcement agencies are
generally willing to cooperate on joint raids, and in 2003 several
large seizures were made as a result of such raids. Further, in
February 2004 the Russian Anti-Piracy Organization reported that police
raids involving optical media products took place almost daily all over
Russia and were covered widely on national TV channels. In addition,
according to the U.S. Embassy, the consumer products industry reports
progress in reducing the amount of counterfeit consumer goods on the
Russian market, and one major U.S. producer even claims that it has
virtually eliminated counterfeiting of all its consumer goods lines.
Finally, according to a U.S. Embassy official, the first prison
sentence was handed down during the summer of 2004 for an IPR violator
who had been manufacturing and distributing pirated DVDs.
U.S. and Russian officials have identified several problems that the
Russian government faces in implementing effective IPR protection in
the future. Issues identified include: (1) the price of legitimate
products is too high for the majority of Russians, who have very modest
incomes; (2) Russian citizens and government officials are still
learning about the concept of private IPR--a Russian Ministry of Press
official pointed out that until the dissolution of the Soviet Union,
all creations belonged to the state, and the general public and the
government didn't understand the concept of private IPR; and (3)
corruption and organized crime make the effective enforcement of IPR
laws difficult.
[End of section]
Appendix VII: Country Case Study: Ukraine:
The State of IPR in Ukraine:
Ukraine has been the subject of intense industry and U.S. government
concern since 1998 owing primarily to the establishment of pirate
optical media plants that produced music, video discs, and software for
the Ukraine market and for export to other countries. This followed the
crackdown on pirate plants in Bulgaria in 1998 that resulted in many of
these manufacturers relocating to Ukraine. Regarding Ukraine, USTR
cites U.S. music industry losses of $210 million in revenues in 1999,
while the Motion Picture Association reported losses of $40
million.[Footnote 62] The international recording industry association
estimated that the production capacity of optical media material was
around 70 million units per year and the demand within Ukraine for
legitimate CD was fewer than 1 million units in 2000. Further the audio
and video consumer market in Ukraine has consisted overwhelmingly of
pirated media. For example, in 2000, the international recording
industry association estimated that 95 percent of products on the
market were pirated. Further, USTR and industry cite significant
counterfeiting of name brand products, pharmaceuticals, and
agricultural chemicals.
By 2004, IPR in Ukraine has shown improvement in several areas,
although the digital media sold in the consumer retail market remain
predominantly pirated. The production of such digital media in local
plants has ended however, according to U.S. government and industry
officials in Kiev. Further, U.S. officials noted Ukraine's accession to
key WIPO conventions and improvements in intellectual property law that
represents progress in fulfilling TRIPS requirements as part of
Ukraine's WTO accession process.
Remaining areas of concern regarding U.S. IPR are inadequacies in the
existing optical media licensing law and the fact that Ukraine remains
a key transit country for pirated products. Other areas of concern are
the prevalence of pirated digital media products in the consumer retail
markets, lack of law enforcement actions, and the use of illegal
software by government agencies (although this situation has also
improved). U.S. industry and government now seek certain amendments to
intellectual property laws and better enforcement efforts, including
border controls to prevent counterfeit and pirated products from
entering the Ukrainian domestic retail market.
U.S. Government Actions to Address Ukraine's IPR problems:
The U.S. government has undertaken concerted action in Washington and
Kiev to address its concerns regarding the state of intellectual
property protection in Ukraine. With the emergence of serious music and
audio-visual piracy, Ukraine was placed on USTR's Special 301 Watch
list in 1998. Ukraine was elevated to USTR's Special 301 Priority Watch
list for 2 years, in 1999 and 2000. In June 2000, during President
Clinton's state visit to Kiev, he and President Kuchma endorsed a U.S.-
Ukrainian joint action plan to combat optical media piracy. However,
slow and insufficient response by Ukraine led to its designation as a
Priority Foreign Country in 2001 and to the imposition of punitive
economic sanctions (100 percent duties) against Ukrainian exports to
the United States valued at $75 million in 2002. The Priority Foreign
Country designation remains in place. The sanctions affect a number of
Ukrainian exports, including metal products, footwear, and chemicals.
In addition, a U.S. government review of Ukraine's eligibility for
preferential tariffs under the GSP program was undertaken, and
Ukraine's benefits under this program were suspended in August 2001.
GSP benefits have not been reinstated.
In Kiev, intellectual property issues remain a priority for the U.S.
Embassy, including the U.S. Ambassador. A State Department economic
officer has been assigned responsibility as the focal point for such
issues and has been supported in this role by the actions of other U.S.
agencies. The Commercial Law Center, funded by USAID, and the
Commercial Law Development Program of the U.S. Department of Commerce
have provided technical advice to Ukraine as it crafted intellectual
property laws.[Footnote 63] A U.S. private sector association reported
that it had worked closely with USAID on projects related to commercial
law development. Ukrainian legislative officials reported that training
opportunities and technical assistance provided by the United States
had facilitated the creation of IP legislation. Training is also
focused on enforcement, including training of a Ukrainian judicial
official by USPTO in Washington, D.C., during 2003. The State
Department has trained police and plans further police training in
Ukraine during 2004. Further, Department of Commerce officials maintain
contact with U.S. firms and collect information on intellectual
property issues for State and USTR.
Changes in Ukraine's IPR Protection:
Ukraine has made improvements in its legal regime for IPR protection.
According to Ukrainian officials, Ukraine passed a new criminal code
with criminal liability for IPR violations, as well as a new copyright
law. Ukrainian officials report that the laws are now TRIPS compliant.
U.S. government documents show that Ukraine implemented an optical disk
law in 2002, although it was deemed "unsatisfactory," and sanctions
remain in place based on Ukraine's failure to enact and enforce
adequate optical disk media licensing legislation.
In addition, Ukraine has pursued enforcement measures to combat
counterfeiting, although enforcement overall is still considered weak.
USTR reported that administrative and legal pressure by the Ukrainian
government led to the closure of all but one of the major pirate CD
plants. Some pirate plants moved to neighboring countries. According to
U.S. and private sector officials in Kiev, remaining optical plants
have switched to legitimate production. However, pirated optical media
are still prevalent in Ukraine, imported from Russia and elsewhere,
with little effort to remove them from the market. In a visit to the
Petrovska Market in Kiev, we found a well-organized series of buildings
where vendors sold movies, music, software, and computer games from
open-air stands. The price for a pirated music CD was $1.50, compared
to legitimate CDs that were sold for almost $20 in a music store
located near the market.
According to USTR, Ukraine is a major trans-shipment point and storage
location for illegal optical media produced in Russia and elsewhere. A
Ukrainian law enforcement official reported that the number of IPR
crimes detected has risen from 115 in 2001 to 374 in 2003. He noted
that to date, judges have been reluctant to impose jail time, but had
used fines that are small compared to the economic damages. A U.S.
government official also reported that the fines are too small to be an
effective deterrent.
While one U.S. company told us about the lack of Ukrainian government
actions regarding specific IPR enforcement issues, a large U.S.
consumers goods company told us that consumer protection officials and
tax police had worked with it to reduce counterfeit levels of one
product line from approximately 40 percent in 1999 to close to zero
percent 16 months later. The company provided 11 laboratory vans as
well as personnel that could accompany police to open markets and run
on-the-spot tests of products.
[End of section]
Appendix VIII: Comments from the Department of Commerce:
THE SECRETARY OF COMMERCE:
Washington. D. C. 20230:
August 20, 2004:
Mr. Loren Yager:
Director:
International Affairs and Trade:
U.S. General Accounting Office:
441 G Street, N.W.:
Washington, D.C. 20548:
Dear Mr. Yager:
The Department of Commerce appreciates the opportunity to review the
draft report entitled "Intellectual Property: U.S. Efforts Have
Contributed to Strengthened Laws Overseas, but Challenges Remain." We
found the report very comprehensive and our comments are provided as an
enclosure.
Sincerely,
Signed by:
Donald L. Evans:
Enclosure:
U.S. Department of Commerce Comments Regarding Draft Report (GAO-04-
912) "Intellectual Property U.S. Efforts Have Contributed to
Strengthened Laws Overseas."
We found the report to contain a good summary of the activities
undertaken by a number of U.S. Government agencies to strengthen
intellectual property rights (IPR) laws in certain countries that are
perceived as not adequately protecting intellectual property. Since
much of the information in the report is anecdotal, it is difficult to
conclude how much our government's activities have impacted IPR
protection in those countries. Nevertheless, we believe that your
report documents that progress is being made. Further progress will be
likely when countries recognize the value of their own intellectual
property and of the commercialization of their own technologies.
General Comments:
We would advise that the terms "counterfeiting" and "piracy" be used in
their more technical sense. GAO uses the term "counterfeiting" to refer
to all types of infringements or IPR violations, even when discussing
optical media (e.g., see page 4, "the growing problem of counterfeiting
of optical media"). It would be more technically precise when
discussing violations of intellectual property rights, to use the term
"counterfeiting" in connection with commercial scale trademark-related
infringements of a good or product, and "piracy" only when discussing
the commercial-scale infringement of copyright-protected works. It
would be more technically accurate to use the terms "trademark
counterfeiting" and "copyright piracy."
The report states that U.S. Government IPR activities can be grouped in
three categories: policy initiatives; training and assistance
activities, and law enforcement. While "advocacy" can be included in
the category of "training and assistance," we believe that advocacy
deserves separate mention. In our meetings with GAO staff, we provided
a number of real life success stories resulting from DOC overseas staff
working to champion specific IPR issues. DOC/ITA's Foreign Commercial
Service provides services directly to constituents, which result in
tangible benefits for American firms and brands.
This report underestimates the scope of IPR protection and enforcement
work carried out as a part of our regular interactions with trading
partners. While FTAs and BTAs are mentioned and are certainly important
and high profile, a significant component of U.S. Government work also
involves discussions under Trade and Investment Framework Agreements
and Bilateral Investment Treaties, as well as other bilateral and
regional trade mechanisms, such as APEC-IPEG activities.
The Department's International Trade Administration (ITA) participated
in at least two meetings with the GAO staff; still, ITA's role is not
recognized in the draft report.
The following are GAO's comments on the Department of Commerce's letter
dated August 20, 2004.
GAO's Comments:
1. We have reviewed the report to ensure that the term "counterfeiting"
is used to refer to commercial-scale trademark-related infringements of
a good or product and the term "piracy" is used to refer to commercial-
scale infringements of copyright-protected works.
2. While we do not discuss "advocacy" separately in this report, this
type of effort has been addressed in the policy initiatives section of
the report, specifically in the discussion entitled "U.S. Officials
Undertake Diplomatic Efforts to Protect Intellectual Property" (see p.
18). We note that U.S. government officials overseas, including
officials from the Department of Commerce, work with U.S. companies and
foreign governments to address specific IPR problems. We have also
included a particular example involving Department of Commerce efforts
to resolve problematic issues related to proposed Mexican legislation
that involved the pharmaceutical industry. We have also added another
reference to advocacy efforts on page 27.
3. We chose to emphasize IPR-specific agreements, bilateral trade
agreements, and free trade agreements in our report (discussion
entitled "U.S. Government Engages in IPR-Related Trade Negotiations")
because USTR officials consistently cited these agreements as central
components of their IPR efforts. However, we do note the negotiation of
trade and investment framework agreements in footnote 24 of the report.
4. The efforts of the Department of Commerce's International Trade
Administration (ITA) are cited in our report. The report does not
specifically list the ITA, as we intentionally kept the discussion for
all government entities at the "departmental" level (with a few
exceptions for entities that have distinct responsibilities, such as
the FBI and USPTO) without mentioning the numerous bureaus and offices
involved for each department. This approach was adopted to keep the
report as clear as possible for the reader. While the report does not
specifically attribute Commerce's IPR efforts to ITA, several examples
of Commerce's efforts that are listed in the report are, in fact, ITA
activities. For example, in addition to the activities cited in point 2
above, Commerce (meaning ITA) is also mentioned as a participant in
annual GSP and Special 301 reviews (see pp. 12 and 32), and as a
participant in IPR efforts in the report's China, Russia, and Ukraine
appendixes. Further, we have specified that Commerce (meaning ITA),
along with USTR, is the administrator for the private sector trade
advisory committee system (p. 15).
[End of section]
Appendix IX: Comments from the Department of Homeland Security:
U.S. Department of Homeland Security:
Washington, DC 20528:
Homeland Security:
August 24, 2004:
Loren Yager:
Director, International Affairs and Trade:
U.S. Government Accountability Office:
441 G St., NW:
Washington, DC 20548:
Dear MS. Yager:
RE: GAO-04-912, Intellectual Property: U S. Efforts Have Contributed to
Strengthened Laws Overseas, but Challenges Remain (GAO Job Code
320199):
Thank you for the opportunity to review your draft report. The
Department of Homeland Security (DHS) appreciates the work done in this
draft report to identify approaches to Safeguard intellectual property
rights overseas. We are providing general comments for your use in
preparing the final report. Additionally, this assumes that GAO will
incorporate DHS's technical comments that were provided under separate
cover and discussed by telephone.
We propose that the final report reflect Customs and Border
Protection's (CBP) work with the World Customs Organization (WCO)
garding Intellectual Property Rights (IPR) protection. CBP participates
in the WCO+ IPR Strategic Group as a member of the group's Executive
Committee, which is responsible for steering the group's activities.
The WCO IPR Strategic Group was developed as a joint venture with
international business sponsors to help member customs administrations
to improve the efficiency and effectiveness of their IPR border
enforcement programs.
The WCO IPR Strategic Group provides an overview of the global
counterfeiting phenomenon from the customs administrations'
perspectives and a full range of Services for the exclusive benefit of
its members and sponsors including collection of intelligence and data
regarding IPR violations globally. The group meets quarterly to
coordinate its activities, to discuss current issues in IPR border
enforcement, and to advise member customs administrations regarding
implementation of border measures under Trade-Related Aspects of
Intellectual Property Rights (TRIPs). In addition, the WCO IPR
Technical Assistance Group Sponsors and cu ucts technical assistance,
including training, fellowship programs, practical exercises and IPR
management consultant services to WCO member administrations.
Most importantly, through the WCO, DHS's CBP has led the effort in
drafting WCO model IPR legislation and strategic plans geared towards
global IPR protection and otherwise helping foreign countries develop
the tools necessary for effective border enforcement programs.
CBP also contributes to efforts aimed at strengthening international
IPR protection through its work with the APEC Sub-Committee on Customs
Procedures and the World Intellectual Property Organization (WIPO). In
addition, CBP routinely provides IPR training to foreign governments on
a bilateral basis through programs sponsored by the Departments of
Commerce and State. Through its International Visitors Program CBP
routinely consults with foreign government officials and academics
regarding border enforcement of IPR. In addition, CBP frequently meets
with industry and trade associations interested in protection of IPR.
IPR Center feedback from industry recipients of outreach presentations,
that included a variety of IPR manufacturing industries, has been both
positive and productive. Additionally, there has been a significant
increase in requests for the IPR Center to provide additional outreach
presentations.
Although the draft recognizes that DHS participates in bilateral and
multi-lateral discussions and negotiations regarding IPR enforcement,
it ignores the fact that DHS's CBP is the expert on border enforcement
of IPR as regards foreign governments as well as other U.S. Government
agencies. The importance of border enforcement cannot be overstated as
it offers the most efficient means of identifying and disposing of
infringing articles. CBP routinely provides experts on border measures
for training programs sponsored by various U.S. and international
agencies and organizations.
Sincerely,
Signed by:
Anna Dixon:
Director,
Departmental Liaison:
The following are GAO's comments on the Department of Homeland
Security's letter dated August 24, 2004.
GAO's Comments:
1. We have added a paragraph citing the Department of Homeland
Security's work with the World Customs Organization (see p. 17).
2. We added language on p. 22 of the report that notes that a key
component of DHS authority is a "border nexus."
[End of section]
Appendix X: Comments from the U.S. Agency for International
Development:
USAID:
U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT:
August 19, 2004:
Loren Yager:
Director:
International Affairs and Trade:
U.S. General Accounting Office:
441 G Street, N.W.:
Washington, DC 20548:
Dear Mr. Yager:
I am pleased to provide the U.S. Agency for International Development's
(USAID) formal response on the draft GAO report entitled INTELLECTUAL
PROPERTY-U.S. Efforts Have Contributed to Strengthened Laws Overseas,
but Challenges Remain (September 2004).
We have reviewed the draft report and appreciate the time and effort of
your team. There are, however, several points raised in the report
concerning USAID's involvement in promoting the enforcement of
intellectual property rights on which we have provided comments in the
enclosed document.
Thank you for the opportunity to respond to the GAO draft report and
for the courtesies extended by your staff in the conduct of this
review.
Sincerely,
Steven Wisecarver:
Deputy Assistant Administrator:
Bureau for Management:
Enclosure: a/s:
USAID Comments on GAO Draft Report Entitled: INTELLECTUAL PROPERTY -
U.S. Efforts Have Contributed to Strengthened Laws Overseas but
Challenges Remain (September 2004):
There are several points raised in the report concerning USAID's
involvement in promoting the enforcement of intellectual property
rights on which we would like to elaborate further.
First is the report's assertion that USAID is one of several U.S.
Government agencies "primarily responsible for U.S. Government
activities to protect and enforce U.S. intellectual property rights
overseas." While many IPR technical assistance activities that are
funded through USAID have the effect of protecting and enforcing U.S.
intellectual property rights, this is not a primary responsibility of
our agency. USAID is a development agency, and the IPR training and
technical assistance we provide is done to help partner countries
comply with existing international agreements that serve to promote
economic growth.
For example, USAID has helped numerous countries harmonize their
foreign trade regimes in order to enable them to both join the World
Trade Organization (WTO) and to comply with WTO obligations. In order
to accomplish this, many of our WTO accession assistance projects have
included training and support for counterpart countries to comply with
the Agreement on Trade-Related Aspects of Intellectual Property Rights
(the TRIPs agreement). This training and support, it should be noted,
is primarily directed at promoting economic growth through improved IPR
regimes in the countries we work in. As mentioned above, this may also
have the benefit of helping American owners to enforce their IPR in
such countries.
Second, the report raises concerns regarding the frequency of USAID's
contributions to the voluntary IPR Training database, which is managed
by the U.S. Department of State. To ensure that our projects are
calibrated to local needs, USAID field units (such as country missions
and field offices) program and manage the bulk of our trade capacity
building projects in the field. Consequently, the USAID staff attending
IPR Training Coordination Group meetings in Washington generally does
not have decision-making authority regarding the commitment of funds
spent on IPR technical assistance activities. Their role is to liaise
and facilitate communication between members of the Group and USAID
funding units.
Third, the GAO report appears to dismiss the fact that USAID provides
significant and comprehensive information on all USG-sponsored IPR
technical assistance activities on an annual basis. USAID conducts a
Trade Capacity Building (TCB) survey once per year, typically
completing this massive information gathering exercise by August 31.
The USAID TCB survey is sent to all U.S. government agencies and
departments active in trade capacity building activities abroad,
including the Departments of State, Justice, and Commerce, the US
Patent and Trademark Office (USPTO), and USAID field units. Data
collected from USAID's TCB Survey is analyzed to avoid double counting
and then formatted for uploading onto the USAID TCB database.
The problem of double-counting should not be lightly dismissed. For
example, much of USAID's funding for IPR activities is actually passed
to other USG agencies and departments through interagency agreements
and other funding vehicles. These agencies may then channel USAID-
sourced funds to yet other agencies. For example, the Commercial Law
Development Program of the U.S. Department of Commerce is a large
recipient of USAID funds; CLDP in turn frequently channels such funds
to USPTO to conduct assistance activities on its behalf.
The TCB database may be accessed by all USG agencies, and it is located
at the following web link: http://qesdb.cdie.org/tcb/index.html. Once
this data is collected, IPR training activities are culled and
submitted for inclusion in the IPR Training database managed by the
State Department. (The creators of the IPR Training database consulted
with USAID's managers of the TCB database in order to make the
information between the two databases more easily transferable.)
While USAID only collects this data once a year, the data is rich,
comprehensive, and timely. The USAID TCB survey gathers information on
funding levels that each USG respondent is obligating for IPR training
activities for the current fiscal year.
Thus, the ongoing survey for August 2004 is gathering data for FY 2004
USG obligations related to IPR and other activities. Since most
activities that are funded in FY 2004 will actually be implemented
during FY 2005, the survey results are timely and distinctly relevant
for members of the IPR Training Coordination Group in projecting
planned spending on IPR on a country and agency basis.
Finally, should members of the IPR Training Coordination Group desire
specific and even more up-to-the moment information about the status of
IPR training activities in specific countries, USAID liaisons can work
to obtain this information.
The following are GAO's comments on the U.S. Agency for International
Development's letter dated August 19, 2004.
GAO's Comments:
1. We agree with USAID's point that IPR protection and enforcement are
not the primary responsibility of the agency. USAID and the other 9
U.S. government entities mentioned in the report have broader missions.
Rather, we state that USAID and the other U.S. government entities
undertake the primary U.S. government activities to improve the
protection and enforcement of U.S. intellectual property overseas.
2. As we noted in the report, the decentralized structure of USAID,
whereby individual country missions plan and implement training, makes
it difficult for Washington-based officials to contribute timely
information to the public training database or to inform the Training
Coordination Group about USAID's training efforts. Further, several
members of the Training Coordination Group are frustrated with the
extent of USAID's information sharing.
3. As we note in the report, USAID submits information annually
following the conclusion of its own data-gathering exercise. However,
this data-gathering exercise, which contributes to the USAID trade
capacity building database, does not provide information needed by the
Training Coordination Group, such as dates of training or contact
information, that would improve coordination.
[End of section]
Appendix XI: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Emil Friberg, (202) 512-8990 Leslie Holen, (415) 904-2277:
Acknowledgments:
In addition to those named above, Sharla Draemel, Ming Chen, Martin de
Alteriis, Matt Helm, Ernie Jackson, Victoria Lin, and Reid Lowe made
key contributions to this report.
(320199):
FOOTNOTES
[1] The United States exports intellectual property in both goods and
services. In 2002, the United States earned more than $44 billion in
royalties and license fees overseas, higher than any other country in
the world. Royalties and license fees in this case are from the
authorized overseas use of intangible, nonproduced, nonfinancial assets
and proprietary rights (such as patents, copyrights, and trademarks),
and the use of produced originals or prototypes (such as manuscripts
and cinematographic works).
[2] NIPLECC was mandated under Section 653 of the Treasury and General
Government Appropriations Act, 2000, Public Law 106-58 (15 U.S.C.
section 1128).
[3] A copyright provides protection for literary and artistic works
such as books, musical compositions, and cinematographic works
(movies). A copyright is a property right in an original work of
authorship that arises automatically upon creation of such a work and
belongs, in the first instance, to the author. A patent protects an
invention by giving the inventor the right to exclude others from
making, using, or selling a new, useful, nonobvious invention during a
specific term. Trademarks are words, phrases, logos, or other graphic
symbols used by manufacturers or merchants to identify their goods and
distinguish them from others. Other types of intellectual property
include trade secrets, industrial designs, and geographical
indications. Geographical indications are names used to identify
products with quality, reputation or other characteristics attributable
to the origin of the product. According to a USTR official, examples of
geographical indications are cognac, Idaho potatoes, Roquefort, and
bourbon. USTR officials noted that while some countries have separate
geographical indication protection systems, the United States protects
geographical indications through its trademark system.
[4] There are various loss estimates due to counterfeiting and piracy.
For example, the International Intellectual Property Association
estimated that losses due to piracy of U.S. copyrighted materials
around the world have reached $20 to $22 billion annually (not
including Internet piracy). According to the 2003 Department of
Homeland Security statistics on seizures, the majority of goods seized
at U.S. ports of entry were counterfeit goods, worth more than $90
million. USTR reported in its 2003 Special 301 report that losses to
U.S. companies due to piracy and counterfeiting amounted to $200 to
$250 billion, although we could not find the original source of this
number (the closest figure we could identify came from the
Counterfeiting Intelligence Bureau of the International Chamber of
Commerce, which estimated worldwide losses in 1995 due to
counterfeiting at $250 billion, 5 percent of the world's merchandise
trade). Industry representatives we spoke with acknowledged the
difficulties in accurately estimating the losses, but pointed out that
the enormity of the problems is hard to dispute.
[5] For example, the Department of Homeland Security received an
allegation concerning the smuggling of counterfeit vodka into the
United States. Recognizing potential health and safety concerns, the
department immediately investigated the case and subsequently seized
counterfeit vodka in Florida and Massachusetts.
[6] Although the FBI is part of the Department of Justice and the USPTO
is part of the Department of Commerce, their roles will be discussed
separately because of their distinct responsibilities.
[7] For purposes of presentation, we are classifying USTR's actions and
activities as U.S. "policy efforts" rather than as law enforcement
actions. We recognize, and USTR officials emphasized to us, that
certain efforts, such as conducting Special 301 reviews, ensuring
compliance with trade agreements, and taking IPR cases to the WTO for
dispute settlement, can be classified as enforcement actions. However,
for our presentation, we have placed government activities that can
lead to U.S. court or administrative hearings, and that can involve
criminal activity, together as law enforcement actions, and we have
grouped the more discretionary activities of USTR and other agencies
together as "policy efforts."
[8] As amended by the 1988 Omnibus Trade And Competitiveness Act (P.L.
100-418).
[9] PFCs are those countries that (1) have the most onerous and
egregious acts, policies, and practices with the greatest adverse
impact (actual or potential) on the relevant U.S. products and (2) are
not engaged in good-faith negotiations or making significant progress
in negotiations to address these problems.
[10] Countries are put on the Priority Watch List for not providing an
adequate level of intellectual property protection or enforcement, or
market access for persons relying on intellectual property protection.
Watch List countries have intellectual property problems that merit
bilateral attention.
[11] Intellectual property reviews can be part of an annual or "out-of-
cycle" Special 301 review, with the latter initiated by USTR in
instances where the need to investigate a country's IPR practices falls
outside the regular, annual review cycle. China, Paraguay, and Ukraine
were designated as PFCs at times that fell outside the regular Special
301 process.
[12] Ukraine was cited as failing to comply with the "U.S.-Ukraine
Joint Action Plan to Combat Optical Media Piracy in Ukraine" agreed to
by the presidents of both countries in 2000. Although the Ukrainian
government implemented an optical media disc licensing law in early
2002, U.S. government and industry officials viewed the law as
inadequate.
[13] USTR estimated the loss to the U.S. current account (the current
account has three separate components): (1) net export of goods and
services, (2) investment income from assets abroad, and (3) net
unilateral transfers) due to piracy in music CDs and software in
Ukraine and held two public hearings on the choice of tariff lines
subject to 100 percent ad valorem duties to minimize the damage to
domestic producers and consumers. The affected products fall into 10
general categories: mineral fuels and oils; inorganic chemicals;
fertilizer; tanning or dyeing extracts; paper and paperboard; footwear;
pearls and semiprecious stones; copper; aluminum; nuclear reactors and
boilers.
[14] Special 301 was amended in the Uruguay Round Agreements Act to
clarify that a country can be found to deny adequate and effective
intellectual property protection even if it is in compliance with its
obligations under the TRIPS agreement.
[15] While we requested a comprehensive listing of countries assessed
and GSP benefits removed due to IPR problems, USTR was unable to
provide us with such data because this information in not regularly
collected.
[16] According to USTR, 134 countries and nonindependent locations are
GSP beneficiaries. A review is currently underway to determine whether
to designate Iraq as a GSP beneficiary country.
[17] This listing includes only negotiated agreements that have entered
into force.
[18] These areas include copyrights, patents, trademarks, trade
secrets, layout designs of integrated circuits, industrial designs, and
geographical indications. For more information, see GAO, The General
Agreement on Tariffs and Trade: Uruguay Round Final Act Should Produce
Overall U.S. Economic Gains, GAO/GGD-94-83b (Washington, D.C.: July
1994).
[19] TRIPS provides that countries must ensure that enforcement
procedures are in place that permit effective actions against any act
of infringement of IPR covered by TRIPS, including expeditious remedies
to prevent infringements and remedies which constitute a deterrent to
further infringement.
[20] Two of the countries with which the United States has specific IPR
agreements or understandings are not members of the WTO (Bahamas and
Vietnam). Nine of the countries with which the United States has
negotiated broader bilateral agreements that include intellectual
property provisions since 1990 are not members of the WTO, (Azerbaijan,
Belarus, Cambodia, Russia, Tajikistan, Turkmenistan, Ukraine,
Uzbekistan, Vietnam) though most are seeking to accede.
[21] Participants in the Central America Free Trade Agreement (CAFTA)
are the United States, Costa Rica, El Salvador, Guatemala, Honduras,
Nicaragua, and the Dominican Republic.
[22] Of these seven FTAs, only Chile, Jordan and Singapore have entered
into force; negotiations have been completed for Australia, Bahrain,
CAFTA and Morocco, but these agreements have not yet entered into
force. Prior to 2000, two other FTAs had entered into force: the U.S.-
Israel FTA (entered into force in 1985) and the North American Free
Trade Agreement between the United States, Canada, and Mexico (entered
into force in 1994).
[23] Congress established the private sector advisory committee system
on trade in Section 135 of the Trade Act of 1974 (19 U.S.C. section
2155). This system is administered by USTR and the Department of
Commerce. The IPR committee, comprising representatives of law firms,
associations, and companies, is 1 of 16 Industry Trade Advisory
Committees that provide their industry-specific perspectives to the
U.S. government.
[24] The U.S. government also works to strengthen the protection and
enforcement of intellectual property in trade and investment framework
agreement negotiations with several countries in regions such as the
Middle East and Asia.
[25] In 2003, WTO members reached an agreement that waived a TRIPS
article and thereby allows countries that produce generic
pharmaceutical products (via a process called "compulsory licensing")
to export them to countries that are unable to produce necessary
pharmaceutical items. These exports are allowed to address certain
circumstances, including grave public health problems resulting from
HIV/AIDS, tuberculosis, and malaria.
[26] These reviews are referred to as the "Trade Policy Review
Mechanism."
[27] The WIPO Copyright Treaty brings copyright law in line with the
digital age and entered into force on March 6, 2002. The WIPO
Performances and Phonograms Treaty safeguards the interests of
producers of phonograms or sound recordings as well as those of
performers whose performances are fixed in phonograms; it entered into
force on May 20, 2002. These treaties help raise the minimum standards
of intellectual property protection around the world, particularly with
respect to Internet-based delivery of copyrighted works.
[28] A State Department official in Geneva noted that one of State's
key efforts in WIPO has been to urge WIPO to reduce PCT fees (the
equivalent of "user fees" for those parties filing for international
patents, most of whom are American) to better reflect the costs of
administering the patent cooperation system, rather than use the fees
to subsidize the general operations of the organization. This official
noted that during the establishment of WIPO's 2004-2005 budget, State
worked with WIPO staff and member country representatives to avoid a
proposed increase in PCT fees and was even able to achieve a decrease
in fees.
[29] According to the Department of State, Public Diplomacy and
Cultural Exchange offices work to create a more hospitable environment
for IPR in foreign countries by, among other activities, hosting
educational programs, publishing materials, and working with local
press to get coverage of IPR issues.
[30] For example, according to a Department of Commerce official, in
2003, U.S. Embassy staff in Mexico worked with industry to raise issues
related to proposed legislation that provided for overly broad
compulsory licensing of pharmaceutical products and did not provide
appropriate royalty compensation. According to this official, several
months after this joint effort began, the Mexican Congress passed an
acceptable bill.
[31] The Department of Commerce's Office of the Inspector General
issued a report in 2000 that discussed USPTO's international training
efforts, Patent and Trademark Office: Efforts to Protect U.S.
Intellectual Property Rights Overseas Should Be Strengthened, Final
Audit Report No. BTD-11747 (Washington, D.C.: August 2000).
[32] Because so many agencies and offices within agencies initiate
training and technical assistance activities that may be relevant to
IPR, it is difficult to fully account for all of them.
[33] For example, USDA sponsors programs supporting the development of
biotechnology overseas that can include an IPR component.
[34] The Computer Crime and Intellectual Property Section (CCIPS)
addresses intellectual property issues (copyright, trademark, and trade
secrets) within the Department of Justice's Criminal Division. In April
2004, CCIPS appointed an International Coordinator for Intellectual
Property--an action that, in addition to bolstering international
prosecutorial efforts, is intended to improve coordination between
policy and law enforcement agencies. CCIPS works to determine how it
can provide assistance to improve law enforcement in priority
countries. Aside from investigations and prosecutions, CCIPS efforts
include training and diplomatic efforts to build cooperative relations
between U.S. and foreign law enforcement officials.
[35] These foreign countries were Belgium, Denmark, France, Germany,
Hungary, Israel, the Netherlands, Singapore, Sweden, and Great Britain
and Northern Ireland. According to a Justice official, law enforcement
officials in Spain subsequently took action against related targets in
that country. For more information on this and other investigations,
see GAO, File Sharing: Selected Universities Report Taking Action to
Reduce Copyright Infringement, GAO-04-503 (Washington, D.C.: May 28,
2004).
[36] In another notable instance, referred to as "Operation Buccaneer,"
CCIPS and DHS worked with local law enforcement from five countries
(the United Kingdom, Australia, Norway, Sweden, and Finland) to
simultaneously execute more than 65 searches worldwide in December 2001
in connection with IPR crimes. As a result of these efforts, 4 people
were convicted in the United Kingdom, 4 were convicted in Finland, and
27 were convicted in the United States. For this case, Justice
attorneys and DHS agents traveled to the United Kingdom during the past
3 years to support prosecution efforts. In what would be the first
extradition for online copyright piracy, the Department of Justice is
seeking extradition of an Australian to the United States for
prosecution in this case. DHS also noted that Operation Buccaneer led
to a spin-off investigation in April 2003, initiated by DHS, known as
Operation TENS/Safehaven.
[37] According to a Department of State document, there are over 50
MLATs in force.
[38] According to a DHS official, the following factors account for the
enormous increase in counterfeit cigarettes seizures over the past few
years: (1) profit margin; (2) increased availability and knowledge of
where to obtain counterfeit cigarettes (especially from China); (3)
manufacture and packaging that makes the counterfeit cigarettes look as
though they were produced in the United States; and (4) easier
marketing and sale of the counterfeit products to unsuspecting
consumers.
[39] One additional area of note regarding counterfeit seizures
involves pharmaceutical products. DHS, in cooperation with the
Department of Health and Human Services' Food and Drug Administration,
conducts "blitz" exams in an effort to target, identify, and stop
counterfeit and potentially unsafe prescription drugs from entering the
United States from foreign countries via mail and common carriers. Such
efforts have been undertaken over the past year in locations such as
Florida, New York, and California and have identified, in some
instances, drugs that appeared to be counterfeit. For more information
on federal efforts regarding prescription drugs imports, see GAO,
Prescription Drugs: Preliminary Observations on Efforts to Enforce the
Prohibitions on Personal Importation, GAO-04-839T (Washington, D.C.:
July 22, 2004).
[40] Section 337 of the Tariff Act of 1930 as amended (19 U.S.C.
section 1337).
[41] Argentina, Brazil, Canada, Denmark, Greece, Ireland, India, Japan,
Pakistan, Portugal, and Sweden.
[42] India-U.S. Patent Protection of Pharmaceutical Products, WT/DS 50/
R (Jan. 16, 1998), as modified by WT/DS 50/AB/R; Canada-Term of Patent
Protection, WT/DS 170/R (Oct. 12, 2000), upheld at WT/DS 170/AB/R.
[43] Conversely, several IPR cases against the United States have been
brought to the WTO.
[44] A DHS official noted that in some instances, companies are
successful in pursuing investigative and enforcement actions on their
own with foreign officials. We found evidence of such successful
cooperation in Ukraine, where Procter & Gamble (P&G) worked jointly
with local officials to conduct product tests at local markets,
resulting in a decrease in counterfeiting of P&G products. According to
a P&G official in the Ukraine, within 3 years the extent of estimated
counterfeit products in the market place went from 40 percent for
shampoos and 20 percent for detergents down to essentially no
counterfeit products.
[45] The Trade Expansion Act of 1962.
[46] According to a USTR official, the final decision has been elevated
to the Cabinet level on more than one occasion when particularly
sensitive issues were involved; past reviews involving China, India,
and Brazil were addressed at the Cabinet level.
[47] Twenty-one executive branch government bodies are invited to
participate in this interagency process: the Council of Economic
Advisors; the Council on Environmental Quality; the Departments of
Agriculture, Commerce, Defense, Energy, Health and Human Services,
Homeland Security, Interior, Justice, Labor, State, Transportation, and
Treasury; the Environmental Protection Agency; the Agency for
International Development; the National Economic Council; the National
Security Council; the Office of Management and Budget; USTR (Chair);
and the International Trade Commission (non-voting member). The
Copyright Office is also consulted during the annual Special 301
interagency review.
[48] According to a State Department official, the Bureau of
International Narcotics and Law Enforcement at the Department of State
is planning to spend $2.5 million on intellectual property law
enforcement training this fiscal year, a substantial increase from the
estimated $250,000 spent on intellectual property and cybercrime
training in 2003. The State Department has been working with other
bureaus and agencies to collect training proposals and review where and
how the new funding should be spent.
[49] The database can be viewed at http://www.training.ipr.gov.
[50] National Intellectual Property Law Enforcement Coordination
Council Report, 2001-2002.
[51] National Intellectual Property Law Enforcement Coordination
Council Report, 2003.
[52] The IPR Center arose from the work of the National Security
Council's Special Coordination Group on Intellectual Property Rights
and Trade-Related Crime. This group was formed in order to implement
Presidential Decision Directive 42 concerning international crime. In
1999, a consensus of the group members resulted in a multi-agency plan
to improve the U.S. government's efforts in IPR enforcement, and the
IPR Center was created.
[53] An official from the National Association of Manufacturers, an
industry group whose membership consists primarily of small or medium-
sized companies, told us that member companies do not use the IPR
Center because they are unaware of this resource. An official from
another industry group stated that the center has not been particularly
useful to date.
[54] The DHS seizure data are available at http://www.cbp.gov/xp/cgov/
import/commercial_enforcement/ipr/seizure/.
[55] Regarding the level of specificity provided when raising seizure
figures with foreign governments, a USTR official stated that it is not
typical to address the details of a case. USTR has not raised specific
seizure cases or asked a foreign government to take action against
specific violators. Whether the details necessary to provide such
information are available depends on the information that was collected
by DHS at the time of the seizure. USTR will defer to DHS to provide
the appropriate level of information when discussing seizures with
foreign governments. A DHS official noted that the Trade Secrets Act
(18 USC section 1905) precludes sharing information about specific
imports, even where there is criminal activity. The Trade Secrets Act
makes it a criminal offense for an employee of the United States, or
one of its agencies, to disclose trade secrets and certain other forms
of confidential commercial and financial information except where such
disclosure is "authorized by law."
[56] In July 2003, the House Committee on International Relations held
a hearing entitled "Intellectual Property Crimes: Are Proceeds From
Counterfeited Goods Funding Terrorism?" The Secretary General of
Interpol testified at this hearing.
[57] According to one music industry official, this effort is targeted
throughout the entire former Soviet Union except for the Baltic states.
[58] "Whack-a-mole" refers to an amusement park game where a "mole" is
hit with a mallet into a hole on the board only to immediately
resurface from another hole. Industry and government officials
regularly use this analogy to describe the phenomenon of IPR problems
migrating from a country that takes actions to fight such problems to
another country that is less vigilant.
[59] India-U.S. Patent Protection of Pharmaceutical Products, WT/DS 50/
R (Jan. 16, 1998), as modified by WT/DS 50/AB/R; Canada-Term of Patent
Protection, WT/DS 170/R (Oct. 12, 2000), upheld at WT/DS 170/AB/R.
[60] Section 306 (19 U.S.C. section 2416), requires that USTR monitor
the implementation of each measure undertaken, or agreement that is
entered into, by a foreign country under the Special 301 review.
[61] GAO, World Trade Organization: U.S. Companies' Views on China's
Implementation of Its Commitments, GAO-04-508 (Washington, D.C.: Mar.
24, 2004).
[62] The U.S. government placed prohibitive tariffs on $75 million
worth of Ukraine exports in 2002 after it estimated the loss
independently.
[63] Representatives of the Ukrainian legislature told us that there
had been a problem coordinating U.S. government legal advice to the
Ukraine. The legislature had to reconcile differences in the legal
approach of the two U.S.-funded entities in a second reading of
amendments to IPR legislation.
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