“The USTR has placed China at the top of the Report’s Priority Watch list, which reflects the U.S. concerns ‘with China’s system of pressuring and coercing technology transfer, and the continued need for fundamental structural changes to strengthen IP protection and enforcement.’”
On April 29, the Office of the U.S. Trade Representative (USTR) released its 2020 Special 301 Report on Intellectual Property Protection and its 2019 Review of Notorious Markets for Counterfeiting and Piracy. The Report identifies countries and IP-related market access barriers and steps necessary to address those barriers. Section I of the Report highlights “Developments in Intellectual Property Rights Protection, Enforcement, and Related Market Access” and Section II is a Priority Watch List including country reports for countries where particular problems exist with respect to IP protection, enforcement, or market access. The Review identifies illustrative examples of online and physical markets that are alleged to have contributed to substantial trademark counterfeiting and copyright piracy activities around the world.
Improvements and Concerns
Section I of the Report notes that the USTR has been engaging with trading partners to address concerns regarding pharmaceutical and medical device innovation and market access to ensure that trading partners contribute their fair share of research and development of new treatments and cures. For example, in the past year, the USTR has secured strong IP provisions with Canada and Mexico with the United States-Mexico-Canada Agreement (USMCA), secured enforceable commitments from China with respect to potential pharmaceutical patent disputes, and engaged with Korea to secure reform to ensure transparency with respect to pharmaceutical and medical device pricing and reimbursement policies. USTR highlighted some best practices by trading partners in the area of IP protection and enforcement, including the introduction of IP enforcement coordination mechanisms/agreements by countries including the United States, Thailand and India. Further, specialized IP enforcement units have been employed in Brazil, Malaysia and Jamaica to help fight against counterfeiting and piracy. Several trading partners, such as Spain, India and Thailand, have also conducted IP awareness and educational campaigns to develop support for domestic IP initiatives. Costa Rica, Greece, Jamaica and Switzerland have been removed from the Watch List, and Kuwait was moved from the Priority Watch List to the Watch List for its steps to update copyright laws and increase enforcement.
However, the report also notes that in “virtually all countries identified in [the] Report” IP enforcement is lacking. Several countries, including Brazil, China, Colombia, Hong Kong and India, were listed as not providing adequate or effective border enforcement against counterfeit and pirated goods. The Report also focuses on an increasing “government measures, policies, and practices that require or pressure technology transfer from U.S. companies”, thereby distorting trade by forcing U.S. companies to transfer their technology to national entities. Other issues highlighted in the Report include copyright enforcement issues with respect to online and broadcast piracy, restrictive patentability criteria, and inadequate protection for trade secrets.
China Remains On Top
The USTR has placed China at the top of the Report’s Priority Watch list, which reflects the U.S. concerns “with China’s system of pressuring and coercing technology transfer, and the continued need for fundamental structural changes to strengthen IP protection and enforcement, including as to trade secret theft, obstacles to protecting trademarks, online piracy and counterfeiting, the high-volume manufacturing and export of counterfeit goods, and impediments to pharmaceutical innovation.” The Report also notes that China is subject to Section 306 monitoring, wherein the USTR monitors a trading partner’s compliance with measures that are the basis for resolving an investigation under Section 301; the USTR may take trade action if a country fails to implement such measures satisfactorily.
India is also included on the Priority Watch List list due to a lack of sufficient measurable improvements to the IP framework on longstanding and new challenges that have negatively affected U.S. right holders, such as those that make it difficult to receive, maintain, and enforce patents, especially in the pharmaceutical industry. Further, the USTR placed Indonesia on the Priority Watch List for a lack of adequate and effective IP protection and enforcement, particularly with respect to patentability criteria and compulsory licensing. Chile, which has not delivered on IP commitments to the U.S., and Trinidad and Tobago, for lack of enforcement actions against operators broadcasting unauthorized cable and satellite channels, are also on the Priority Watch List.
The Review of Notorious Markets
The USTR’s Review of Notorious Markets cited a number of positive efforts and enforcement actions addressing the widespread availability of pirated or counterfeit goods in some online and physical markets since the last review was released. For example, the Ukraine’s nationwide anti-piracy operation resulted in the shutting down of four video streaming sites: Kinogo, UAFilm, UKRFilm, and Kino-HD. Increased enforcement in Uruguay also led to the closure of a popular linking service to unlicensed movies, Pelispedia. Further, Thailand shut down its most-visited pirated movie and TV content provider, Movie2free.com.
The Review also included a section focusing on the nexus between online piracy and malware. Malware was defined as “unwanted software that is installed on computers or mobile devices without consent and is often used to take advantage of computers or personal information in unwanted ways” and noted some examples backdoor Trojans, Cryptominers, Ransomware, and Botnets. The Review noted that the nexus between online piracy and malware is tied to financial incentives as well as the pirated content itself. For example, cybercriminals may link malware-infected content to pirated games, TV shows or movies, or pirated essays and textbooks. The Review explained that consumers should rely on legitimate sources of copyright-protected content and antivirus software from legitimate providers in order to protect themselves from malware infections.
A review of notorious online markets identified a growing concern with social media and the proliferation of counterfeit goods. The Review identified 1337x as a website that links to torrent files, i.e. small files containing information necessary to download other files from a bittorrent distributed peer-to-peer network for unlicensed movies, TV shows, music, and software. The site has been subject to blocking orders in the United Kingdom, Denmark, Portugal, Belgium, Indonesia, Ireland, Malaysia, India, Austria, Australia and Italy. Further, the Review identified 1FICHIER as a cyberlocker that allegedly distributes unlicensed movies and video games as premium content. Amazon’s foreign domains, including amazon.ca, amazon.co.uk, amazon.de, amazon.fr, and amazon.in, were also listed due to concerns related to challenges with counterfeits on e-commerce platforms around the world.
The physical notorious markets review illustrated that China was again a top source of counterfeit goods. Several markets in China were identified, including mall-sized markets in Guangzhou for selling apparel and shoes and Huaqiangbei Electronics Malls in Yuan Wang, Long Sheng, and Man Har for vending electronic devices and components. Some Chinese markets in larger cities have taken action to limit the sales of counterfeit products, but the policies and procedures remain inconsistent. The Review also noted that Ecuador’s La Bahia Market is a large market for the sale of counterfeit products such as apparel, footwear, DVDs, and CDs. Reportedly, vendors at the La Bahia market openly sell counterfeit products without being subject to any enforcement operations. Many other markets were identified in the Review, including markets in India, Mexico and the Ukraine.