U.S. and Macau (1998)

01 May 1998

Fact Sheet: Special 301 on Intellectual Property Rights

Following is the USTR Fact Sheet on "Special 301":

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FACT SHEET

"SPECIAL 301" ON INTELLECTUAL PROPERTY RIGHTS

ACTIONS TAKEN

United States Trade Representative Charlene Barshefsky today announced the Administration's decision with respect to this year's review under the so-called "Special 301" provisions of the Trade Act of 1974, as amended (Trade Act).

This decision reflects the Administration's continued commitment to aggressive enforcement of protection for intellectual property. Intellectual property protection has been improving in part as a result of the implementation of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (the TRIPS Agreement). The decision also reflects progress made over the course of 1997 in resolving many longstanding problems.

The decision announced by Ambassador Barshefsky includes the following specific actions:

-- continuing the section 301 investigation of Paraguay following on its identification as a Priority Foreign Country on January 6, 1998.

-- initiating WTO dispute settlement procedures against Greece and the EU.

-- monitoring China under Section 306 of the Trade Act of 1974, as amended. This means that USTR will be in a position to move directly to trade sanctions if there is slippage in China's enforcement of the bilateral IPR agreements.

-- placing 15 trading partners on the Special 301 Priority Watch List including Israel, Macao, Argentina, Ecuador, Egypt, the European Union, Greece, India, Indonesia, Russia, Turkey, Bulgaria, Italy, Dominican Republic, and Kuwait and conducting an "out-of-cycle" review of Bulgaria.

-- placing 32 trading partners on the Watch List, and conducting out-of-cycle reviews of Hong Kong, Colombia, Jordan, and Vietnam.

-- In addition, the Administration noted growing concerns or highlighted developments and expectations for progress in 15 trading partners.

Other WTO dispute settlement proceedings and out-of-cycle reviews will be initiated if necessary.

STATUTORY AUTHORITY

The "Special 301" provisions of the Trade Act of 1974, as amended, require the USTR to determine whether the acts, policies and practices of foreign countries deny adequate and effective protection of intellectual property rights or fair and equitable market access for U.S. persons that rely on intellectual property protection. 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. It was also amended to direct the USTR to take into account a country's prior status and behavior under "Special 301."

Once this pool of countries has been determined, the USTR is required to decide which, if any, of these countries should be designated Priority Foreign Countries. Priority Foreign Countries are those countries that:

(1) have the most onerous and egregious acts, policies and practices which have 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.

If a trading partner is identified as a Priority Foreign Country, the 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 Priority Foreign Country. A Special 301 investigation is similar to an investigation initiated in response to an industry Section 301 petition, except that the maximum time for an investigation under Special 301 is shorter in some circumstances.

Today's Special 301 announcement follows a lengthy information gathering and negotiation process. The interagency Trade Policy Staff Committee that advises the USTR on implementation of Special 301, obtains information from the private sector, American embassies, the United States' trading partners, and the National Trade Estimates report.

This Administration is determined to ensure the adequate and effective protection of intellectual property rights and fair and equitable market access for U.S. products. The measures announced today result from close consultations with affected industry groups and Congressional leaders, and demonstrate the Administration's commitment to utilize all available avenues to pursue resolution of intellectual property rights issues. In issuing the announcement, Ambassador Barshefsky is expressing the Administration's resolve to take consistently strong actions under the Special 301 provisions of the Trade Act.

DESCRIPTION BY COUNTRY OF EXISTING SITUATION AND MEASURES TAKEN

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SECTION 306 MONITORING

China: Based on the 1995 and 1996 Bilateral IPR Agreements and extensive follow-up work with Chinese officials, China now has a functioning system to protect intellectual property rights (IPR). As an integral part of this national effort, numerous laws, regulations and circulars were issued during 1997. However, we are concerned with end-user piracy of business software, continuing retail piracy, growing trademark counterfeiting and problems in obtaining administrative protection for pharmaceuticals. In addition, the trademark registration process is inconsistent, a problem exacerbated by the lack of judicial review of decisions made by the trademark office. U.S. officials will continue to work to ensure that China strengthens its enforcement against illegal importation, distribution, reproduction and sale of all illegitimate IPR products.

PRIORITY WATCH LIST

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Macao is being elevated to the Priority Watch List because of an explosion of illegal CD, CD-ROM and VCD manufacturing in Macao which causes economic losses to U.S. business. Macao has taken initial enforcement actions, including the seizure of production lines. We look to the Government of Macao to intensify cooperation with the representatives of the legitimate copyright holders, prosecute vigorously copyright violators, and enact a strong new copyright law. We also look to Macao to reinforce its system for the regulation and monitoring of production equipment. We welcome recent assurances from the Government of Macao to address these issues, as well as new legislation to take effect May 1 that will license the import and export of compact discs and CD production equipment. We look forward to the implementation of an anti-piracy program that will quickly yield tangible results.

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WATCH LIST

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Hong Kong: The United States is encouraged by the progress Hong Kong has made in the few months since the results of the out-of-cycle review were announced in January. However, despite significant steps forward, the piracy situation has continued to worsen. Retail distribution of pirated products continues to flourish, and illegal production of optical media is increasing rapidly. The United States is pleased that new anti-piracy legislation requiring licensing and inspection of CD production sites passed earlier this year and that a licensing requirement for the import and export of machinery and equipment used for production of compact discs, video compact discs, or CD-ROMs was implemented in late 1997. Hong Kong officials also improved cooperation with the copyright industries, leading to the initiation of a reward system for information concerning commercial pirate operations, and are taking increasingly significant enforcement actions. We look forward to full implementation of the anti-piracy legislation later this year, effective enforcement actions, and to a significant reduction in piracy rates in 1998. We will review Hong Kong's progress toward these goals in an out-of-cycle review in September.

[...Intervening Text...]

OTHER OBSERVATIONS

Developments in Intellectual Property Rights

1997

May

-- Indonesia approved amendments aimed at bringing the country's copyright law into compliance with the standards of TRIPs. The amendments include the establishment of exclusive rental rights for computer programs and sound recordings and the extension of the term of protection of computer programs to 50 years.

-- The Government of Indonesia ratified the Paris text of the Berne Convention (Decree No. 8 of 1997) on May 7.

-- Indonesia ratified the new WIPO Copyright Treaty (Decree No. 19 of 1997) on May 7.

June

-- The Government of the Philippines enacted a comprehensive IPR Code (Republic Act 8293) on June 8.

-- The Hong Kong Special Administrative Region (HKSAR) passed a new copyright law addressing software decompilation and parallel imports and also granted customs enhanced authority to seize suspected pirated goods.

-- On June 24, the San Marino Parliament approved a new law concerning bootlegging and other IPR issues, such as the mark of origin system on molds for locally manufactured CDs.

July

-- Hungarian law on trademarks and geographic indications became effective July 1st. This law greatly enhances the possibility of obtaining injunctions for trademark infringement.

-- A Russian Anti-Piracy Organization was established by the U.S. and Russian film industries to assist in enforcement training.

September

-- WTO Panel ruled in favor of the United States in our case against India regarding India's failure to establish a "mailbox" system for filing patent applications for pharmaceuticals and agricultural chemicals and failure to establish a system of exclusive marketing rights for these products.

-- Indonesia became a party to the Berne Convention.

-- The Government of Luxembourg implemented amendments to the copyright law that brought it into compliance with TRIPs and substantially increased penalties.

-- Bolivia created a National Service of Intellectual Property. This new agency is responsible for protecting all IPR -- the first time patents, trademarks and copyright issues will be the responsibility of one agency.

-- Egypt resumed enforcement efforts against software piracy.

October

-- The People's Republic of China's criminal law codifying the nature of copyright infringement took effect on October 1.

-- The Government of Bulgaria established an Intellectual Property Council.

-- Panama's Supreme Court restored the Copyright Office's power to conduct ex officio seizures of counterfeit foreign works.

November

-- In Uruguay, a judge issued an eight-month prison sentence to a notorious local software pirate; this is the first time that a judge used the sentencing provisions of the 1937 copyright law.

December

-- The Government of Hong Kong imposed a licensing requirement for the import and export of machinery and equipment used for production of compact discs, video compact discs, or CD-ROMs. The HKSAR also proposed legislation calling for registration and licensing for current and future optical media production facilities, with tough penalties for non-compliance.

-- The WTO Appellate Body ruled in favor of the United States on India's appeal of the Panel's decision in India -- Patent Protection for Pharmaceuticals and Agricultural Chemicals Products.

-- Trinidad and Tobago proclaimed IPR legislation to finish implementing our bilateral IPR agreement.

-- The Government of Taiwan passed amendments to the copyright law on December 30.

-- Thailand opened an Intellectual Property and International Trade Court.

-- Vietnam ratified the Bilateral Copyright Agreement negotiated with the United States.

-- Poland's Central Board of Customs announced that customs authorities will enforce copyright laws utilizing a new customs code (in force in 1998). According to Customs officials, the new code will simplify customs procedures and make it easier for authorities to seize infringing goods.

-- On December 26, Mexico passed an amendment to its 1994 Industrial Property Law, adding a chapter protecting the layout design of integrated circuits.

-- Belarus became a member of the Berne Convention on December 12.

-- The Dominican Republic became a member of the Berne Convention on December 24.

-- The Government of Turkey issued regulations equalizing taxes on domestic and foreign films.

1998

January

-- Philippines' new IPR Code took effect on January 1.

-- Two laws came into effect in South Africa on January 1: the Intellectual Property Laws Amendment Act -- which amended several acts, including the Patent Act, the Copyright Act, and the Trademarks Act -- and the Counterfeit Goods Act.

-- The Government of Bulgaria adopted a CD plant licensing scheme.

-- Government of Romania passed the Pipeline Protection Ordinance on January 30.

-- Romania acceded to the agreements establishing international classifications in the industrial property field and the Trademark Treaty Law on January 8. The Romanian Parliament also ratified the Madrid Agreement.

-- Nicaragua signed a Bilateral Intellectual Property Rights Agreement with the United States on January 7 -- the first such agreement in Central America and the fourth in the hemisphere.

-- Kazakhstan's new Criminal Code entered into force January 1.

February

-- On February 24, the Japanese Supreme Court issued its first infringement finding under the "doctrine of equivalents," thereby broadening its interpretation of patent claims.

-- Singapore enacted a copyright amendment bill.

-- The San Marino Parliament approved a comprehensive update of San Marino IPR laws on February 25.

-- Brazilian President Cardoso signed into law both the Software Bill and amendments to the 1973 Copyright Law on February 19.

-- The Guatemalan Congress approved ratification of the Paris Convention on February 18.

-- In Turkey, Prime Minister Yilmaz issued a detailed directive to government agencies requiring the use of licensed software.

-- Ireland committed to expedite drafting of a comprehensive new copyright law and also committed to draft and pass separate expedited legislation raising criminal penalties for copyright infringement.

March

-- The Hong Kong legislature approved the "Prevention of Copyright Piracy" bill on March 25. The bill provides Hong Kong customs with the power to take stronger enforcement action against violators.

-- Macao announced that it would establish a license regime on all imports and exports of compact disc production equipment and actual compact discs.

-- The Bulgarian Minister of Interior announced on March 19 the formation of a new specialized anti-piracy unit within the National Service for combating organized crime in illicit CD production.

The Criminal Circuit court for Panama City issued a finding of "criminally responsible" against a video store owner for violations of the copyright law on March 10; this represents the first criminal conviction in Panama for copyright infringement.

-- The Colon Free Zone (CFZ) in Panama inaugurated its department of intellectual property to coordinate IPR enforcement actions in the CFZ on March 25.

-- The Korean Government opened a Patent Court on March 1.

-- The Korean Government adopted the International Classification System, and the amended Trademark and Industrial Design Laws went into effect on March 1.

-- On March 30th, United States Trade Representative Charlene Barshefsky announced that the United States partially suspended trade benefits that Honduras receives under the Generalized System of Preferences and Caribbean Basin Initiative programs as a result of Honduras' continued failure to provide adequate and effective IP protection.

-- In Australia, legislation to extend patent protection for pharmaceuticals passed the House and was introduced into the Senate.

April

-- Cyprus' Parliament passed a new patent law that is reportedly one of the strongest in the region.

-- Bolivia signed an IP side letter to our bilateral investment treaty committing to bring its law into compliance with TRIPS within 12 months.

-- Guatemala's Congress passed new copyright legislation.

-- Ecuador's Congress passed new intellectual property rights legislation on April 22.

-- Ecuador's Constitutional Tribunal upheld the legality of pipeline patents on April 23.

-- The Government of Sweden published amendments to its copyright law which provide for provisional ex parte relief in civil cases.

-- On April 28, the Government of Greece closed 20 television stations that did not submit license applications by the March 23 deadline.

-- On April 24, a Dutch court upheld the confidentiality of pharmaceutical test data submitted to regulatory authorities.

-- Honduras took its first significant enforcement actions against two major television stations engaged in piracy.

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