2 Feb 2018
U.S. Issues Special Review of Global Markets Engaging in IPR Infringement
USTR released on 11 January the results of its Special 301 out-of-cycle review of notorious markets for 2017. This review identifies 25 on-line markets and 18 physical markets around the world that reportedly engage in and facilitate substantial copyright piracy and trademark counterfeiting. USTR notes 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.
According to USTR, this year’s report highlights illicit streaming devices as an emerging piracy model of growing concern. It also calls on several e-commerce platforms to improve takedown procedures, proactive measures and co-operation with right holders, particularly small- and medium-sized businesses, to decrease the volume and prevalence of counterfeit and pirated goods on their platforms.
The report finds that some progress has taken place over the past year, USTR states. Some market owners and operators have made efforts to address the widespread availability of pirated or counterfeit goods in their markets. In addition, some governments (including Argentina and Thailand) continue to institute novel strategies to combat piracy and counterfeiting, such as voluntary initiatives with advertising networks to cut off financial support for websites devoted to copyright infringement, installing intellectual property enforcement centres on-location in high-priority physical markets, and using skills training to reorient former counterfeit sellers toward operating legitimate businesses.
USTR notes that some previously identified markets may not appear on this year’s list for a variety of reasons, including that the market has closed or its popularity or significance has diminished, enforcement or voluntary action has reduced or eliminated the prevalence of infringing goods or services, market owners or operators are co-operating with right holders or government authorities to address infringement, the market is no longer a noteworthy example of its kind, or no commenter nominated the market for continued inclusion on the list. However, USTR continues to monitor markets that no longer appear on the list and may re-list them if there is a change in circumstances; e.g., a website or physical market that ceased to operate because of enforcement or other action resumes 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 off-line. 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 2017 report are Hongqiao Market (Beijing), Silk Market (Beijing), Shenzhen Jindu Garment Wholesale Market (Shenzhen), Jinxiang Foreign Trade Garment Market (Guangzhou), Jinshun Garment Market (Guangzhou) and Zhanxi Area Markets (Guangzhou). The report notes, among other things, that according to local media reports some of the shops selling counterfeits at Hongqiao Market are clandestine (doors remain closed except to known customers) while other shops solicit shoppers by showing them photos of the counterfeit goods in the street and then escorting them into shops or warehouses. Some shops even provide mailing services to send counterfeit products abroad.
Hongqiao Market was recently the subject of a January 2017 ruling in Beijing’s Dongcheng District Court declaring that it bore joint liability along with the counterfeit sellers and had to pay US$75,000 in damages to one right holder. Additionally, in April and July 2017 mainland Chinese enforcement officials raided Hongqiao Market and seized a significant number of counterfeit products. Moreover, the Beijing Administration of Industry and Commerce has placed Hongqiao Market on its priority-watch list for trademark infringement.
The report also mentions DHGate.com, a mainland Chinese business-to-business e-commerce platform that enables SMEs in the mainland to sell more than 33 million product listings to customers overseas. Over most of the last eight years, right holders have consistently reported challenges with a wide variety of counterfeit or copyright-infringing consumer goods on DHGate and continued to do so in 2017. The site is also reportedly a leading on-line marketplace for the sale and distribution of counterfeit and pirated academic textbooks, with deliveries made in small parcels or via third-party sellers. DHGate reports that it reached out to nominators to address concerns, including regarding difficulties in filing intellectual property complaints. USTR has urged DHGate to work closely with right holders to address their considerable concerns.
USTR further contends that a high volume of infringing products reportedly continue to be offered for sale and sold on Taobao.com and stakeholders continue to report challenges and burdens associated with intellectual property enforcement on the platform. In particular, SMEs continue to have problems accessing and utilising takedown procedures on Taobao.com. In 2017, more SMEs requested assistance from U.S. government agencies and embassies regarding Taobao.com than any other e-commerce platform. Created and owned by the Alibaba Group, Taobao.com is mainland China’s largest mobile commerce destination and the third most popular website in the mainland. According to USTR, Alibaba has undertaken efforts, some within the last six months, to curb the offer and sale of infringing products on Taobao.com and some right holders report an improved outlook as a result. At the same time, the report notes, the prevalence of infringing listings and sales continues to be a challenge and there are additional steps Alibaba must take to address on-going concerns.
USTR has called on Alibaba to take the following actions over the next year: (i) seriously consider expanding its reported ban on automotive air bags and air bag components listings on the Alibaba.com and AliExpress.com platforms to the Taobao.com platform, as well as to other widely-counterfeited products not ordinarily sold in C2C marketplaces such as brake pads and other automotive parts; (ii) take efforts to ensure that its referrals of criminal leads to mainland Chinese authorities lead to meaningful enforcement outcomes, such as by targeting large manufacturers and distributors of counterfeit goods; (iii) seek to improve the effectiveness of the repeat infringer policy; (iv) make available to right holders the contact information of infringing sellers and details on the volume of infringing sales after infringing listings are removed so that right holders can follow-up with enforcement action; (v) seek SME input and provide advisory opportunities to develop more effective policies to address the challenges SMEs face on Taobao.com and other platforms; (vi) improve tools to prevent the unauthorised use of product images for the sale of infringing products; and (vii) ensure that infringing sellers and goods do not migrate from TMall or Taobao.com to other platforms owned and operated by Alibaba, such as Xian Yu, located at 2.taobao.com.
Moreover, USTR believes the TVPLUS, TVBROSWER and KUAIKAN family of apps are reportedly operated by related companies in mainland China to provide users around the world with television, live sports and content protected by copyright and related rights. This family of apps has been downloaded more than 64 million times and each download connects users to allegedly pirated content hosted by third parties. The apps allow viewers in the mainland to stream infringing content on mobile devices or high-definition televisions, posing an additional threat to an already fragile market for legitimate over-the-top and on-line content platforms in the mainland.