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Administration Outlines IPR-Related Concerns, Pledges More Aggressive Action

The Trump administration’s first annual report on intellectual property rights-related trade barriers adopts the more enforcement-oriented tone that has marked much of the administration’s trade actions to date. A USTR press release states that IPR theft “has resulted in distorted markets and unfair trade practices that harm American workers, innovators, service providers, and small and large businesses.” Intellectual property-intensive industries directly and indirectly support 45.5 million U.S. jobs, representing about 30 percent of all domestic employment. The report therefore “reflects the administration’s resolve to aggressively defend Americans from harmful IP-related trade barriers,” including by “using all possible sources of leverage to encourage other countries to open their markets to U.S. exports of goods and services.”

The report places 34 trading partners on the Priority Watch List or the Watch List. Trading partners on the PWL present the most significant concerns regarding insufficient IPR protection or enforcement or actions that otherwise limited market access for persons relying on IPR protection. The trading partners on the PWL in this year’s report in addition to mainland China are Algeria, Argentina, Chile, China, India, Indonesia, Kuwait, Russia, Thailand, Ukraine and Venezuela, unchanged from a year earlier. These trading partners will be the subject of particularly intense bi-lateral engagement during the coming year.

Countries on the lower-level WL, which merit bi-lateral attention to address underlying IPR problems, are Barbados, Bolivia, Brazil, Bulgaria, Canada, Colombia, Costa Rica, Dominican Republic, Ecuador, Egypt, Greece, Guatemala, Jamaica, Lebanon, Mexico, Pakistan, Peru, Romania, Switzerland, Turkey, Turkmenistan, Uzbekistan and Vietnam. Mainland China, Chile, India, Indonesia, Thailand and Turkey have been included on either the PWL or the WL every year since the report’s inception in 1989.

USTR also announced that it will launch an out-of-cycle review of PWL country Kuwait in an effort to enhance engagement and encourage progress on IPR issues of concern. The agency will also continue its on-going reviews of WL country Colombia as well as one country that is not currently listed (Tajikistan). Moreover, USTR closed its reviews of Pakistan and Spain highlighting efforts in those countries to address a number of IPR concerns.  

As expected, concerns regarding mainland China continue to feature prominently throughout the report. On the positive side, USTR welcomed the expansion of a pilot programme for specialised intellectual property courts to include four new tribunals. The specialised courts initiated positive steps to address concerns regarding evidentiary burdens, low damages and other matters. Beijing has also recognised trade secrets as the subject of civil intellectual property protection and published for comment draft amendments to the 1993 Anti-Unfair Competition Law, which is one of several measures important to trade secrets protection.

Despite these and other encouraging steps, USTR believes mainland China continues to present serious challenges for U.S. IPR holders with respect to adequate and effective intellectual property protection as well as fair and equitable market access for U.S. persons that rely on intellectual property protection. Key concerns for U.S. authorities include mainland China’s protection of trade secrets, the extent of manufacturing and sale in the mainland and export from the mainland of counterfeit goods, and mainland China’s promotion of self-sufficient, indigenous innovation through policies on patents and in related areas, including standards and competition law.

In the area of trade secrets, the report states that mainland China has not signalled an intention to develop the stand-alone legislation that would best remedy concerns. Additionally, Washington believes Beijing should issue guiding court decisions to improve consistency in judicial decisions on trade secrets. Legal reform should promote the availability of preliminary injunctions and asset and evidence preservation orders. At the same time, mainland China should ensure that groundless claims of trade secret misappropriation are resolved efficiently and not wielded as leverage in unrelated disputes. Reforms should also address obstacles to criminal enforcement and prevent the disclosure of trade secrets and other confidential information submitted to government regulators, courts and other authorities.

Washington is also troubled by the widespread manufacture, domestic sale and export of counterfeit goods from the mainland, noting that one report estimates that counterfeits may account for over 12 percent of mainland China’s merchandise exports. U.S. Customs and Border Protection and U.S. Immigration and Customs Enforcement Homeland Security Investigations report positive co-operation with the General Administration of China Customs in joint operations and information sharing. U.S. right holders also praise the GACC’s proactive seizure of suspected goods prior to export from the mainland. Nevertheless, USTR states that mainland China should take measures to address the widespread availability of counterfeit goods sold in physical markets and address concerns regarding registration of trademarks in bad faith.

Widespread on-line piracy and counterfeiting in mainland China’s e-commerce markets also ostensibly cause great losses for U.S. right holders involved in the distribution of a wide array of trademarked products, as well as legitimate film and television programming, music, software, video games, books and journals, including scientific, technical and medical publications. U.S. authorities are of the opinion that the final version of mainland China’s e-commerce law should not undermine Internet service providers notices of infringement and cease-and-desist letters and promote a balanced and effective notice-and-takedown regime that addresses on-line piracy and counterfeiting while providing appropriate safeguards to ISPs. USTR also favours action this year on the long-delayed amendments to mainland China’s Copyright Law, including to ensure that sports broadcasts are eligible for copyright protections.

USTR states that mainland China continued its intellectual property and civil judicial reform efforts in 2016 and early 2017. While U.S. authorities believe Beijing’s commitment to reform is positive, the substantive content and results of those efforts is viewed as a mixed bag. The United States has provided formal comments and engaged closely with mainland China on a broad range of measures and welcomes Beijing’s modifications to drafts of measures that appear to address a number of U.S. concerns. Washington notes, however, that any new legislation must promote intellectual property protection and enforcement and must not create new, or tolerate existing, market access obstacles to foreign intellectual property-intensive industries, including in the ICT, motion picture, TV, music, software, video game and book publishing sectors.

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