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China ‘Falls Short’ on Phase One IP Promises: Report

The Office of the United States Trade Representative (USTR) took China to task in its annual Special 301 Report on the adequacy and effectiveness of U.S. trading partners’ protection and enforcement of intellectual property (IP) rights.

USTR said it has been closely monitoring China’s progress in implementing its commitments under the United States-China Economic and Trade Agreement, also known as the Phase One Agreement. The agency said in 2020, China published several draft IP-related legal and regulatory measures and finalized over a dozen.

“Notably, China amended the Patent Law, Copyright Law and Criminal Law in the past year,” USTR said. “However, these steps toward reform require effective implementation and fall short of the full range of fundamental changes needed to improve the IP landscape in China.”

The annual report details USTR’s findings of more than 100 trading partners after significant research and enhanced engagement with stakeholders. Criminal and online enforcement against counterfeiting “remains a global concern,” the report said.

“This past year, countries reported significant quantities of COVID-19 testing kits, personal protective equipment (PPE) such as N-95 and equivalent masks, and sanitizers, detergents and disinfectants from China that were determined to be counterfeit,” USTR said. “Widespread counterfeiting in China’s e-commerce markets, the largest in the world, has also been exacerbated by the migration of infringing sales from physical to online markets, which accelerated during the COVID-19 pandemic.”

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Concerns with the European Union’s aggressive promotion of its exclusionary geographical indications policies persist. The United States continues its intensive engagement in promoting and protecting access to foreign markets for U.S. exporters of products that are identified by common names or otherwise marketed under previously registered trademarks.

“Intellectual property rights incentivize our creators, manufacturers and innovators to invent new products and technologies,” USTR Katherine Tai said. “The laws, policies and practices that protect those rights must appropriately balance the interests of creators with those seeking to use their creations. Failing to adequately and effectively protect those rights in foreign markets hurts the U.S. economy, the dynamism of American innovators and the livelihoods of our workers.”

The Special 301 Report is an annual review of the global state of IP protection and enforcement. USTR reviewed more than 100 trading partners for this year’s report and placed 32 of them on the Priority Watch List or Watch List.

Trading partners on the Priority Watch List present the most significant concerns regarding insufficient IP protection or enforcement or actions that otherwise limited market access for persons relying on IP protection. Nine countries–Argentina, Chile, China, India, Indonesia, Russia, Saudi Arabia, Ukraine and Venezuela–are on the Priority Watch List. These countries will be the subject of particularly intense bilateral engagement during the coming year, the report noted.

Another 23 trading partners are on the Watch List and merit bilateral attention to address underlying IP problems. These are Algeria, Barbados, Bolivia, Brazil, Canada, Colombia, Dominican Republic, Ecuador, Egypt, Guatemala, Kuwait, Lebanon, Mexico, Pakistan, Paraguay, Peru, Romania, Thailand, Trinidad & Tobago, Turkey, Turkmenistan, Uzbekistan, and Vietnam.

The report also highlights progress made by trading partners to resolve and address IPR issues of concern to the United States. The United Arab Emirates (UAE) was removed from the Watch List this year due to the Ministry of Health and Prevention resolving concerns with IP protection of pharmaceutical products. The UAE also made progress on longstanding IP enforcement concerns, particularly through increased efforts by Dubai Customs, and publication of IP enforcement procedures by multiple enforcement authorities.

Algeria was moved from the Priority Watch List to the Watch List thanks to steps the government took to engage and cooperate with stakeholders, improve enforcement efforts and reduce IP-related market access barriers. Brazil’s law enforcement, with support from the Department of Justice’s International Computer Hacking and Intellectual Property (ICHIP) Advisor for Latin America & the Caribbean and Computer Crime & Intellectual Property Section (CCIPS), the U.S. Attorney’s Office for the Eastern District of Virginia, Homeland Security Investigations (HSI), as well as U.K. counterparts, launched “Operation 404.2,” which seized the domain names of multiple commercial websites engaged in the illegal reproduction and distribution of copyrighted works.