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U.S. Issues Special Review of Global Markets Engaging in IPR Infringement

The Office of the U.S. Trade Representative released on 21 December the results of its Special 301 out-of-cycle review of notorious markets for 2016. This review identifies dozens of physical and on-line marketplaces that reportedly engage in and facilitate substantial copyright piracy and trademark counterfeiting.

USTR states that following the release of the 2015 list in December 2015 some market owners and operators have made notable efforts to address the widespread availability of pirated or counterfeit goods in their markets. A number of markets have accelerated responses to infringement complaints, entered into licencing arrangements with right holders, developed technology to identify or prevent infringing uses of platforms, and/or engaged with right holders to develop co-operative procedures. Other markets have closed or experienced disruption as a result of enforcement efforts, including the shutdown of one of the most popular and lucrative illegal piracy sites in the world.

While some markets have thus been removed from the most recent list, USTR continues to monitor these markets, which may be re-listed if there is a change in circumstances; e.g., if a website that ceased to operate as a result of enforcement or other action resumes its unauthorised activities or the corrective actions that merited removal prove inadequate or short-lived.

As in previous years, several commenters continue to identify mainland China as the primary source of counterfeit products. Some mainland Chinese markets, particularly in larger cities, have adopted policies and procedures intended to limit the availability of counterfeit merchandise but USTR believes these policies are not widely adopted and enforcement remains inconsistent. At the same time, some on-line markets are co-operating with law enforcement on counterfeiting and piracy operations offline. It is reported that in many instances mainland Chinese authorities engage in routine enforcement actions in physical markets.

The mainland Chinese physical markets included in the 2016 report are Baiyun Leather Goods Market (Guangzhou), Jin Long Pan Foreign Trade Garment Market (Guangzhou), Chenghai District (Shantou), Wu Ai Market (Shenyang), Cheng Huan Cheng International Auto Parts Market (Beijing) and Silk Market (Beijing). The report also mentions Beevideo.tv, an application that facilitates the viewing of allegedly infringing movies and television shows on smart TVs through set-top boxes and on mobile devices, as well as Gongchang.com, a business-to-business e-commerce platform reportedly well-known for the sale of counterfeits, including security tags that retailers affix to products as part of a shoplifting prevention system. Also included is Nanjing Imperiosus Technology, which is reported to disproportionately provide services to illegal on-line pharmacies.

The report notes, among other things, that at the multi-story Baiyun Leather Goods Market vendors reportedly sell a wide range of counterfeit leather goods and other articles, including to a cross section of foreign buyers. Also in Guangzhou, shops in the Jin Long Pan Foreign Trade Garment Market allegedly sell low-quality, relatively inexpensive counterfeit versions of U.S. and other branded apparel and footwear on a wholesale scale for export to Africa and the Middle East. Chenghai District is reportedly an egregious counterfeiting zone where factories manufacture counterfeit toys and consumer goods for wholesalers. Wu Ai Market is reportedly the home of large-scale marketing of pirated and counterfeit goods at a variety of price points infringing on a wide range of international brands. A broad array of apparently counterfeit car parts and car-related articles are allegedly sold at the Cheng Huan Cheng International Auto Parts Market. Meanwhile, many retail vendors at the Silk Market reportedly distribute counterfeit consumer products.

USTR also considers the Taobao.com e-commerce platform an important concern due to the large volume of allegedly counterfeit and pirated goods available and the challenges right holders experience in removing and preventing illicit sales and offers of such goods. Taobao’s parent company, the Alibaba Group, reportedly has taken steps to address right holders’ concerns on Taobao by establishing internal offices focused on IPR and appointing experienced officers to guide these efforts, addressing the misuse of brand keywords and blurred trademarks in product images, and developing technology to prevent counterfeit sellers from re-opening.

USTR indicates that as Alibaba moves forward with its plans to further reform and enhance its enforcement tools across platforms the recommendations highlighted in the 2015 list remain valid, namely (i) simplifying processes for right holders to register and request enforcement action; (ii) making good faith takedown procedures generally available; and (iii) reducing Taobao’s timelines for takedowns and issuing penalties for counterfeit sellers. In addition, the United States welcomes increased efforts to further refine and identify metrics to assess objectively the scale of infringing products sold over Taobao and other Alibaba platforms as well as additional attention to the needs of SMEs, such as by devoting resources to provide proactive takedowns tailored to assist SMEs.

While recent steps set positive expectations for the future, USTR still believes current levels of reported counterfeiting and piracy are unacceptably high. Given the dominance of mainland Chinese sellers on Alibaba’s platforms, it remains critical for Washington that Beijing support these efforts through measurable enforcement actions across the mainland and stronger domestic IPR reforms identified in previous Special 301 reports, such as the development of mainland China’s e-commerce law.

USTR adds that inclusion on the notorious markets list does not reflect a finding of a violation of law or the U.S. government’s analysis of the general IPR protection and enforcement climate in the country concerned, which is presented in the annual Special 301 report issued at the end of April. However, the United States does urge responsible authorities to investigate reports of piracy and counterfeiting in these and similar markets and pursue appropriate action against such markets and their owners and operators.

Content provided by Picture: HKTDC Research
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