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Report to Congressional Requesters: 

September 2004: 

INTELLECTUAL PROPERTY: 

U.S. Efforts Have Contributed to Strengthened Laws Overseas, but 
Challenges Remain: 

[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-912]: 

GAO Highlights: 

Highlights of GAO-04-912, a report to congressional requesters

Why GAO Did This Study: 

Although the U.S. government provides broad protection for intellectual property, 
intellectual property protection in parts of the world is inadequate. 
As a result, U.S. goods are subject to piracy and counterfeiting in 
many countries. A number of U.S. agencies are engaged in efforts to 
improve protection of U.S. intellectual property abroad. This report 
describes U.S agencies efforts, the mechanisms used to coordinate 
these efforts, and the impact of these efforts and the challenges they 
face.

What GAO Found: 

U.S. agencies undertake policy initiatives, training and assistance 
activities, and law enforcement actions in an effort to improve 
protection of U.S. intellectual property abroad. Policy initiatives 
include assessing global intellectual property challenges and 
identifying countries with the most significant problemsan annual 
interagency process known as the Special 301 reviewand negotiating 
agreements that address intellectual property. In addition, many 
agencies engage in training and assistance activities, such as 
providing training for foreign officials. Finally, a small number of 
agencies carry out law enforcement actions, such as criminal 
investigations involving foreign parties and seizures of counterfeit 
merchandise.

Agencies use several mechanisms to coordinate their efforts, although 
the mechanisms usefulness varies. Formal interagency meetingspart of 
the U.S. governments annual Special 301 reviewallow agencies to 
discuss intellectual property policy concerns and are seen by 
government and industry sources as rigorous and effective. In 
addition, a voluntary interagency training coordination group meets 
about once a month to discuss and coordinate training activities. 
However, the National Intellectual Property Law Enforcement 
Coordination Council, established to coordinate domestic and 
international intellectual property law enforcement, has struggled to 
find a clear mission, has undertaken few activities, and is generally 
viewed as having little impact. 

U.S. efforts have contributed to strengthened intellectual property 
legislation overseas, but enforcement in many countries remains weak. 
The Special 301 review is widely seen as effective, but the impact of 
actions such as diplomatic efforts and training activities can be hard 
to measure. U.S. industry has been supportive of U.S. actions. 
However, future U.S. efforts face significant challenges. For example, 
competing U.S. policy objectives take precedence over protecting 
intellectual property in certain regions. Further, other countries 
domestic policy objectives can affect their political will to 
address U.S. concerns. Finally, many economic factors, as well as the 
involvement of organized crime, hinder U.S. and foreign governments 
efforts to protect U.S. intellectual property abroad.


What GAO Recommends: 

GAO is not recommending executive action. However, the Congress may 
wish to review the National Intellectual Property Law Enforcement 
Coordination Councils authority, operating structure, membership, and 
mission.

[End of section]

Contents: 

Letter: 

Results in Brief: 

Background: 

U.S. Agencies Undertake Three Types of IPR Efforts: 

U.S. Efforts Have Contributed to Improved Foreign IPR Laws, but 
Enforcement Overseas Remains Weak; Industry Supports U.S. Efforts: 

Several Mechanisms Coordinate IPR Efforts, but Their Usefulness Varies: 

U.S. Government Faces Challenges to Further Progress: 

Conclusions: 

Matter for Congressional Consideration: 

Agency Comments: 

Appendixes: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: Trade Agreements Negotiated Since 1990 That Address IPR, 
and the WTO Membership Status for Countries Involved: 

Appendix III: WTO TRIPS Dispute Settlement Cases Brought by the U.S. 
Government: 

Appendix IV: Country Case Study: Brazil: 

Appendix V: Country Case Study: China: 

Appendix VI: Country Case Study: Russia: 

Appendix VII: Country Case Study: Ukraine: 

Appendix VIII: Comments from the Department of Commerce: 

GAO's Comments: 

Appendix IX: Comments from the Department of Homeland Security: 

GAO's Comments: 

Appendix X: Comments from the U.S. Agency for International 
Development: 

GAO's Comments: 

Appendix XI: GAO Contacts and Staff Acknowledgments: 

GAO Contacts: 

Acknowledgments: 

Table: 

Table 1: Countries Designated as Priority Foreign Countries (PFCs) or 
Named to the Priority Watch List Five or More Times during 1994-2004 
Special 301 Reviews: 

Figures: 

Figure 1: Pirated DVDs from Brazil, China, and Ukraine: 

Figure 2: U.S. Agency Participation in Coordination Mechanisms: 

Figure 3: Counterfeit and Legitimate Chinese Pharmaceutical Products: 

Figure 4: Counterfeit and Legitimate Russian Detergent: 

Abbreviations: 

AGOA: African Growth and Opportunity Act: 

ATPA: Andean Trade Preference Act: 

CBI: Caribbean Basin Initiative: 

CD: compact disc: 

DHS: Department of Homeland Security: 

DVD: digital video disc: 

FTA: free trade agreement: 

FBI: Federal Bureau of Investigation: 

GSP: Generalized System of Preferences: 

IPR: intellectual property rights: 

ITAC: Industry Trade Advisory Committee: 

MLAT: mutual legal assistance treaty: 

NIPLECC: National Intellectual Property Law Enforcement Coordination 
Council: 

PFC: priority foreign country: 

TPRG: Trade Policy Review Group: 

TPSC: Trade Policy Staff Committee: 

TRIPS: Agreement on Trade-Related Aspects of Intellectual Property: 

USAID: U.S. Agency for International Development: 

USITC: U.S. International Trade Commission: 

USPTO: U.S. Patent and Trademark Office: 

USTR: Office of the U.S. Trade Representative: 

WCO: World Customs Organization: 

WIPO: World Intellectual Property Organization: 

WTO: World Trade Organization: 

Letter September 8, 2004: 

The Honorable Tom Davis: 
Chairman: 
Committee on Government Reform:
House of Representatives: 

The Honorable Donald Manzullo: 
Chairman: 
Committee on Small Business: 
House of Representatives: 

The Honorable Henry J. Hyde: 
Chairman: 
Committee on International Relations:
House of Representatives: 

The United States dominates the creation and export of intellectual 
property--creations of the mind.[Footnote 1] The U.S. government 
provides broad protection for intellectual property through means such 
as copyrights, patents, and trademarks. However, protection of 
intellectual property in many parts of the world is inadequate, and as 
a result, U.S. goods are subject to substantial counterfeiting and 
piracy in many countries. A recent report by the Office of the U.S. 
Trade Representative (USTR) on the state of intellectual property 
protection in foreign countries concluded that counterfeiting has 
become a massive, sophisticated global business involving the 
manufacture and sale of counterfeit versions of everything from 
shampoos, razors, and batteries to cigarettes, alcoholic beverages, and 
automobile parts, as well as medicine and health care products. The 
report also gave special attention to the growing problem of piracy of 
optical media goods (e.g., CDs, DVDs).

Numerous U.S. agencies are addressing such problems by seeking better 
intellectual property protection overseas. To understand more fully how 
U.S. agencies have performed in this regard, you asked us to identify 
and review their activities. This report addresses (1) the specific 
efforts that U.S. agencies have undertaken to pursue improved 
intellectual property protection in other nations; (2) the impact, and 
industry views, of these efforts; (3) the means used to coordinate 
these efforts; and (4) the challenges that these efforts face in 
generating their intended impact.

To answer these questions, we analyzed key U.S. government intellectual 
property reports and reviewed information from databases such as the 
State Department's intellectual property training database and the 
Department of Homeland Security's online database of intellectual 
property goods seized. We found some limitations in these databases, 
though the data were sufficiently reliable to provide broad 
information. Further, despite our request, we were unable to obtain 
complete data on use of a prominent trade preference program. We met 
with officials from the Departments of State, Commerce, Justice, and 
Homeland Security as well as USTR, the U.S. Patent and Trademark Office 
(USPTO), the Library of Congress's Copyright Office (a legislative 
branch office), the Federal Bureau of Investigation (FBI), the U.S. 
Agency for International Development (USAID), and the U.S. 
International Trade Commission (USITC). We also met with officials from 
key intellectual property industry groups and reviewed reports they had 
prepared. In addition, we attended a private-sector intellectual 
property rights enforcement conference and a U.S. government training 
session. We reviewed economic models used to estimate trade damages due 
to intellectual property losses in Ukraine, which has been subject to 
U.S. trade sanctions since 2002. We also traveled to four countries 
where serious problems regarding the protection of intellectual 
property have been reported--Brazil, China, Russia, and Ukraine--and 
the U.S. government is taking measures to address these problems. (See 
app. IV-VII for detailed information on these countries.) We met with 
U.S. embassy and foreign government officials as well as 
representatives of U.S. companies and industry groups operating in 
those countries. We collected and reviewed U.S. government and industry 
documents in all four nations. We conducted our work from June 2003 
through July 2004, in accordance with generally accepted government 
auditing standards. (See app. I for more detailed information on our 
scope and methodology.)

Results in Brief: 

U.S. agencies' efforts to improve protection of U.S. intellectual 
property in foreign nations fall into three categories--policy 
initiatives, training and assistance activities, and law enforcement 
actions. USTR leads U.S. policy initiatives with an annual assessment 
known as the "Special 301" review, which results in an annual report 
detailing global intellectual property challenges and identifying 
countries with the most significant problems. This report involves 
input from many U.S. agencies and industry. Other policy initiatives 
include requiring adequate intellectual property protection as part of 
trade preference programs and negotiating agreements that address 
intellectual property. In addition to conducting policy initiatives, 
most agencies involved in intellectual property issues overseas also 
engage in training and assistance activities. For example, USPTO and 
the Department of Justice, among others, provide overseas and U.S.-
based training for foreign officials on matters related to intellectual 
property enforcement. Further, although counterterrorism is the 
overriding U.S. law enforcement concern, U.S. agencies such as the 
Departments of Justice and Homeland Security conduct law enforcement 
activities regarding intellectual property rights (IPR). These efforts 
include investigations involving foreign parties, seizures of 
counterfeit merchandise exported from other countries, and prosecutions 
of individuals involved in pirating protected merchandise.

U.S. efforts have contributed to strengthened foreign IPR laws and 
international IPR obligations, and, while enforcement overseas remains 
weak, U.S. industry groups are generally supportive of U.S. efforts. 
These efforts are viewed as aggressive, and the Special 301 review has 
been cited repeatedly by government and industry sources as a useful 
tool in encouraging improvements. However, the precise impact of many 
specific U.S. government activities, such as diplomatic efforts and 
training activities, can be difficult to measure. Further, enforcement 
of intellectual property rights in many countries remains weak, despite 
U.S. efforts. Nonetheless, U.S. industries recognize the many actions 
taken by the U.S. government, and industry groups that we contacted 
both in the United States and overseas were generally supportive of the 
efforts of U.S. agencies to pursue improved intellectual property 
protection overseas.

Several mechanisms exist to coordinate U.S. agencies' efforts to 
protect U.S. intellectual property overseas, although the level of 
activity and usefulness of these mechanisms vary. For example, on the 
policy side, formal interagency meetings are required each year as part 
of the U.S. government's annual Special 301 review. This active process 
allows numerous agencies to share their views on global intellectual 
property problems, incorporate industry input, consider other policy 
considerations, and reach consensus regarding which countries should be 
publicly cited as having IPR problems. Government and industry sources 
view this effort as effective and thorough. In addition, an interagency 
training coordination group with broad public and private sector 
representation meets approximately once per month to discuss and 
coordinate public and private sector training activities. According to 
several private sector and agency officials who participate, the group 
has increased information sharing and provides a forum for 
coordination. Conversely, the National Intellectual Property Law 
Enforcement Coordination Council (NIPLECC),[Footnote 2] which was 
established to coordinate domestic and international intellectual 
property law enforcement among U.S. federal and foreign entities, has 
struggled to find a clear mission, has undertaken few activities, and 
is perceived by private sector and some U.S. agency officials as having 
little impact. Apart from these formal coordination bodies, regular, 
informal communication and coordination regarding IPR-related overseas 
activities occurs among agencies in the United States and in overseas 
embassies. Numerous policy agency officials emphasized to us that this 
type of informal interaction, particularly among interagency staff in 
Washington, D.C., is central to pursuing U.S. intellectual property 
goals overseas. Coordination between policy and law enforcement 
agencies is less systematic.

U.S. efforts to improve intellectual property protection overseas face 
challenges. Competing U.S. policy objectives may take priority over 
protecting intellectual property in certain countries. In addition, the 
impact of U.S. activities overseas is affected by countries' domestic 
policy objectives and economic interests, which may complement or 
conflict with U.S. objectives. U.S. efforts are more likely to achieve 
their intended impacts if intellectual property protection has domestic 
support in foreign countries, and, conversely, U.S. efforts are less 
likely to be effective absent such support. Although U.S. policies can 
affect a country's incentives with mechanisms such as trade preference 
programs or trade sanctions, such tools may be insufficient to overcome 
existing priorities in foreign countries. In addition, many economic 
factors, as well as the involvement of organized crime, pose additional 
challenges to U.S. and foreign governments' efforts, even in countries 
where the political will for protecting intellectual property exists. 
These economic factors include low barriers to entering into the 
production of counterfeit or pirated goods, potential high profits for 
producers of such goods, and large price differentials between 
legitimate and fake products for consumers. The optical media sector 
has been subject to these factors, which have been further exacerbated 
by recent technological advances that allow for high-quality mass 
production and mobile operations.

In this report, we suggest that the Congress review the National 
Intellectual Property Law Enforcement Coordination Council's 
authority, operating structure, membership, and mission.

We provided a draft of this report to the Departments of State, 
Commerce, Justice, Homeland Security and to USTR, USPTO, the Copyright 
Office, the FBI, USAID, and USITC. We received technical comments from 
the Departments of State, Justice, and Homeland Security, USTR, the 
Copyright Office, and USITC. We incorporated these comments into the 
report as appropriate. We also received formal comment letters from the 
Department of Commerce (which includes comments from USPTO), the 
Department of Homeland Security, and USAID. Reproductions of these 
letters, as well as our responses to the letters, can be found in app. 
VIII-X. USAID raised concerns regarding our findings on the agency's 
contribution to an online IPR training database. No agency disagreed 
with our overall findings and conclusions, though all suggested several 
wording changes and/or additions to improve the report's completeness 
and accuracy. The FBI provided no comments on the draft report.

Background: 

Intellectual property is a category of intangible rights that protect 
commercially valuable products of the human intellect, such as 
inventions; literary and artistic works; and symbols, names, images, 
and designs used in commerce. U.S. protection of intellectual property 
has a long history: Article 1 of the U.S. Constitution grants the 
Congress the power "to promote the Progress of Science and useful Arts, 
by securing for limited Times to Authors and Inventors the exclusive 
Right to their respective Writings and Discoveries." Copyrights, 
patents, and trademarks are the most common forms of protective rights 
for intellectual property.[Footnote 3] Protection is granted by 
guaranteeing proprietors limited exclusive rights to whatever economic 
reward the market may provide for their creations and products. 
Ensuring the protection of IPR encourages the introduction of 
innovative products and creative works to the public.

Intellectual property is an important component of the U.S. economy, 
and the United States is an acknowledged global leader in the creation 
of intellectual property. According to USTR, "Americans are the world's 
leading innovators, and our ideas and intellectual property are a key 
ingredient to our competitiveness and prosperity." However, industries 
estimate annual losses stemming from violations of intellectual 
property rights overseas are substantial.[Footnote 4] Further, 
counterfeiting of products such as pharmaceuticals and food items fuels 
public health and safety concerns.[Footnote 5] USTR's Special 301 
annual reports on the adequacy and effectiveness of intellectual 
property protection around the world demonstrate that, from a U.S. 
perspective, intellectual property protection is weak in developed as 
well as developing countries and that the willingness of countries to 
address intellectual property issues varies greatly. U.S. laws have 
been passed that address the need for strong intellectual property 
protection overseas and provide remedies to be applied against 
countries that do not provide adequate or effective protection. For 
example, the Omnibus Trade and Competitiveness Act of 1988 allows the 
U.S. government to impose trade sanctions against such countries.

Eight federal agencies, the FBI, and the USPTO undertake the primary 
U.S. government activities to protect and enforce U.S. intellectual 
property rights overseas. These agencies are the Departments of 
Commerce, State, Justice, and Homeland Security; USTR; the Copyright 
Office; USAID; and USITC.[Footnote 6] The U.S. government also 
participates in international organizations that address intellectual 
property issues, such as the World Trade Organization (WTO), the World 
Intellectual Property Organization (WIPO), and the World Customs 
Organization (WCO).

U.S. Agencies Undertake Three Types of IPR Efforts: 

The efforts of multiple U.S. agencies to protect U.S. intellectual 
property overseas fall into three general categories--policy 
initiatives, training and technical assistance, and U.S. law 
enforcement actions. USTR leads most U.S. policy activities, in 
particular the Special 301 review of intellectual property protection 
abroad. Most agencies involved in efforts to protect U.S. IPR overseas 
conduct training and technical assistance activities. However, the 
number of agencies involved in U.S. law enforcement actions is more 
limited, and the nature of these activities differs from other U.S. 
government actions related to intellectual property protection.

USTR Leads Policy Efforts: 

U.S. policy initiatives to increase intellectual property protection 
around the world are primarily led by USTR, in coordination with the 
Departments of State and Commerce, USPTO, and the Copyright Office, 
among other agencies. These efforts are wide ranging and include the 
annual Special 301 review of intellectual property protection abroad, 
use of trade preference programs for developing countries, negotiation 
of agreements that address intellectual property, and several other 
activities.

Special 301 Review Is Central U.S. Policy Effort: 

A centerpiece of policy activities is the annual Special 301 
process.[Footnote 7] "Special 301" refers to certain provisions of the 
Trade Act of 1974, as amended,[Footnote 8] that require USTR to 
annually identify foreign countries that deny adequate and effective 
protection of intellectual property rights or fair and equitable market 
access for U.S. persons who rely on intellectual property protection. 
USTR identifies these countries with substantial assistance from 
industry and U.S. agencies and publishes the results of its reviews in 
an annual report. Once a pool of such countries has been determined, 
the USTR, in coordination with numerous agencies, is required to decide 
which, if any, of these countries should be designated as a: 

Priority Foreign Country (PFC).[Footnote 9] If a trading partner is 
identified as a PFC, 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 PFC. Such an 
investigation can lead to actions such as negotiating separate 
intellectual property understandings or agreements between the United 
States and the PFC or implementing trade sanctions by the U.S. 
government against the PFC if no satisfactory outcome is reached. In 
its annual Special 301 report, USTR also lists countries with notable 
but less serious intellectual property protection problems as, in order 
of decreasing severity, "Priority Watch List" countries and "Watch 
List" countries.[Footnote 10] Unlike PFCs, countries cited on these 
lists are not subject to automatic consideration for investigation.

Between 1994 and 2004, the U.S. government designated three countries 
as PFCs--China, Paraguay, and Ukraine--as a result of intellectual 
property reviews (see table 1).[Footnote 11] China was initially 
designated as a PFC in 1994 owing to acute copyright piracy, trademark 
infringements, and poor enforcement. Paraguay was designated as a PFC 
in 1998 owing to high levels of piracy and counterfeiting resulting 
from an absence of effective enforcement, its status as a major point 
of transshipment for pirated or counterfeit products to other South 
American countries, and its inadequate IPR laws. The U.S. government 
negotiated separate bilateral intellectual property agreements with 
both countries to address these problems. These agreements are subject 
to annual monitoring, with progress cited in each year's Special 301 
report.

Table 1: Countries Designated as Priority Foreign Countries (PFCs) or 
Named to the Priority Watch List Five or More Times during 1994-2004 
Special 301 Reviews: 

China; 
Years designated as a Priority Foreign Country: 1994, 1996; 
Number of times cited on the Priority Watch List: --; 
Number of times cited on the Watch List: 1.

Paraguay; 
Years designated as a Priority Foreign Country: 1998; 
Number of times cited on the Priority Watch List: 1; 
Number of times cited on the Watch List: 1.

Ukraine; 
Years designated as a Priority Foreign Country: 2001-2004; 
Number of times cited on the Priority Watch List: 2; 
Number of times cited on the Watch List: 1.

Argentina; 
Years designated as a Priority Foreign Country: --; 
Number of times cited on the Priority Watch List: 9; 
Number of times cited on the Watch List: 1.

Dominican Republic; 
Years designated as a Priority Foreign Country: --; 
Number of times cited on the Priority Watch List: 5; 
Number of times cited on the Watch List: 3.

Egypt; 
Years designated as a Priority Foreign Country: --; 
Number of times cited on the Priority Watch List: 7; 
Number of times cited on the Watch List: 4.

European Union; 
Years designated as a Priority Foreign Country: --; 
Number of times cited on the Priority Watch List: 11; 
Number of times cited on the Watch List: --.

Greece; 
Years designated as a Priority Foreign Country: --; 
Number of times cited on the Priority Watch List: 6; 
Number of times cited on the Watch List: 3.

India; 
Years designated as a Priority Foreign Country: --; 
Number of times cited on the Priority Watch List: 10; 
Number of times cited on the Watch List: --.

Indonesia; 
Years designated as a Priority Foreign Country: --; 
Number of times cited on the Priority Watch List: 8; 
Number of times cited on the Watch List: 3.

Israel; 
Years designated as a Priority Foreign Country: --; 
Number of times cited on the Priority Watch List: 5; 
Number of times cited on the Watch List: 3.

Korea; 
Years designated as a Priority Foreign Country: --; 
Number of times cited on the Priority Watch List: 6; 
Number of times cited on the Watch List: 5.

Russia; 
Years designated as a Priority Foreign Country: --; 
Number of times cited on the Priority Watch List: 8; 
Number of times cited on the Watch List: 2.

Turkey; 
Years designated as a Priority Foreign Country: --; 
Number of times cited on the Priority Watch List: 8; 
Number of times cited on the Watch List: 3. 

Source: GAO, based on USTR annual Special 301 reports, 1994-2004.

Notes: China and Paraguay are no longer specifically designated as PFCs 
or placed on the Priority Watch List because they are subject to 
monitoring under separate agreements.

Argentina, India, and China were cited as potential PFCs in the 1994 
Special 301 report; China was designated as a PFC later that year, 
while Argentina and India were never designated as PFCs.

[End of table]

Ukraine, where optical media piracy was prevalent, was designated a PFC 
in 2001.[Footnote 12] No mutual solution was found, and in January 
2002, the U.S. government imposed trade sanctions in the form of 
prohibitive tariffs (100 percent) aimed at stopping $75 million worth 
of certain imports from Ukraine over time.[Footnote 13] These sanctions 
negatively affected Ukraine's exports to the United States. U.S. data 
show that overall imports from Ukraine experienced a dramatic 70 
percent decline from 2000 to 2003. U.S. trade data also show that U.S. 
imports of the items facing punitive tariffs (with one exception) 
declined by $57 million from 2000 to 2003. Since 2001, Ukraine has 
remained the sole PFC and the sanctions have remained in place. In 
early 2002, according to Department of State officials, Ukraine passed 
an optical disc licensing law--a key U.S. factor in originally 
designating Ukraine as a PFC. Further, the Ukrainian government 
reportedly closed plants that were pirating optical media products. 
However, the U.S. government remains concerned that the optical disc 
law is inadequate.

Although it designated only three countries as PFCs between 1994 and 
2004, the U.S. government has cited numerous countries--approximately 
15 per year recently--on its Special 301 Priority Watch List. Of 
particular note, the European Union has been placed on this list every 
year since 1994, while India and Argentina have been on the list for 10 
and 9 years, respectively, during that period.

By virtue of membership in the WTO, the United States and other 
countries commit themselves not to take WTO-inconsistent unilateral 
action against possible trade violations involving IPR protections 
covered by the WTO but to instead seek recourse under the WTO's dispute 
settlement system and its rules and procedures. This may impact any 
U.S. government decision regarding whether to retaliate against WTO 
members unilaterally with sanctions under the Special 301 process when 
those countries' IPR problems are viewed as serious.[Footnote 14]

U.S. Policy Efforts Include Generalized System of Preferences and Other 
Trade Preference Programs: 

U.S. IPR policy efforts also include use of the Generalized System of 
Preferences (GSP) and other trade preference programs administered by 
USTR. The GSP is a unilateral program intended to promote development 
through trade, rather than through traditional aid programs, by 
eliminating tariffs on certain imports from eligible developing 
countries. The GSP was originally authorized by the Trade Act of 1974; 
when it was reauthorized by the Trade and Tariff Act of 1984, new 
"country practice" eligibility criteria were added, including a 
requirement that beneficiary countries provide adequate and effective 
IPR protection. Petitions to withdraw GSP benefits from countries that 
do not meet this criterion can be filed as part of an annual GSP review 
and are typically filed by industry interests. Petitions are considered 
through an interagency process led by USTR, with input from the 
Departments of State and Commerce, among others. In administering the 
GSP program, USTR has led reviews of the IPR regimes of numerous 
countries and has removed benefits from some beneficiary countries 
because of IPR problems.[Footnote 15] Ukraine lost its GSP benefits in 
August 2001 (approximately 6 months before the imposition of sanctions 
that stemmed from Ukraine's designation as a PFC under the Special 301 
process) because of inadequate protection for optical media, and these 
benefits have not been reinstated.

Adequate and effective IPR protection is required by other trade 
preference programs, including the Andean Trade Preference Act (ATPA), 
which provides benefits for Bolivia, Colombia, Ecuador, and Peru; the 
African Growth and Opportunity Act (AGOA); and the Caribbean Basin 
Initiative (CBI). USTR reviews IPR protection provided under these 
trade preference programs, and, according to USTR officials, GSP, which 
includes numerous developing countries,[Footnote 16] has been used more 
actively (in terms of reviews and actual removal of benefits) than 
ATPA, CBI, and AGOA. In fact, according to USTR officials, benefits 
have never been removed under ATPA or AGOA owing to IPR concerns. 
However, USTR officials emphasized that these programs and their 
provisions for intellectual property protection have been used 
effectively nevertheless. For example, one USTR official noted that in 
response to U.S. government concerns regarding whether Colombia was 
meeting ATPA eligibility criteria, the Colombian government implemented 
measures to, among other things, ensure the legitimate use and 
licensing of software by government agencies. USTR also pointed out 
that in Mauritius, an unresolved trademark counterfeiting concern for 
U.S. industry was specifically raised with the government of Mauritius 
as a follow-up to the annual review of the country's eligibility for 
preferences under AGOA. Following bilateral discussions, this 
counterfeiting concern was addressed and resolved.

U.S. Government Engages in IPR-related Trade Negotiations: 

Since 1990, the U.S. government has negotiated 25 IPR-specific 
agreements or understandings with foreign governments. USTR noted that 
USPTO and other agencies are responsible for leading negotiating 
efforts for such agreements (and the Copyright Office participates in 
negotiations as an adviser). According to USTR officials, IPR-specific 
agreements are sometimes negotiated in response to particular problems 
in certain countries and are monitored when a relevant issue arises. 
USTR has also negotiated an additional 23 bilateral trade agreements--
primarily with countries of the former Soviet Union or Eastern Europe-
-that contain IPR provisions (see app. II for a listing of these 
agreements).[Footnote 17]

In addition, the U.S. government, primarily USTR and USPTO (with input 
from the Copyright Office) participated actively in negotiating the 
WTO's Agreement on Trade-Related Aspects of Intellectual Property 
(TRIPS), which came into force in 1995 and broadly governs the 
multilateral protection of IPR. TRIPS established new or improved 
standards of protection in various areas of intellectual 
property[Footnote 18] and provides for enforcement measures.[Footnote 
19] Most of the U.S. government's IPR-specific bilateral agreements and 
understandings were signed prior to the implementation of TRIPS or 
before the other country involved in each agreement joined, or acceded 
to, the WTO and was thus bound by TRIPS commitments. As a result, 
according to a USTR official, some U.S. bilateral agreements have 
become less relevant since TRIPS was implemented.[Footnote 20]

One of USTR's priorities in recent years has been negotiating free 
trade agreements (FTAs). Since 2000, USTR has completed negotiations 
for FTAs with Australia, Bahrain, Central America,[Footnote 21] Chile, 
Jordan, Morocco, and Singapore.[Footnote 22] According to officials at 
USTR, these agreements offer protection beyond that required in TRIPS, 
including, for example, adherence to new WIPO Internet treaties, a 
longer minimum time period for copyright protection, additional 
penalties for circumventing technological measures controlling access 
to copyrighted materials, transparent procedures for protection of 
trademarks, stronger protection for well-known marks, patent protection 
for plants and animals, protection against arbitrary revocation of 
patents, new provisions dealing with domain name disputes, and 
increased enforcement measures. A formal private sector advisory 
committee that advises the U.S. government on IPR issues[Footnote 23] 
has provided feedback to the U.S. government on free-trade agreement 
negotiations, including reports on the impact of free-trade agreements 
on IPR industries in the United States.[Footnote 24]

U.S. Government Participates in International Organizations That 
Address IPR: 

The U.S. government is actively involved in the activities of the WTO, 
WIPO, and WCO that address IPR issues. The U.S. government participates 
in the WTO primarily through the efforts of the USTR offices in 
Washington, D.C., and Geneva and participates in WIPO activities 
through the Department of State's Mission to the United Nations in 
Geneva and through the Copyright Office and the USPTO. The Department 
of Homeland Security (DHS) works with the WCO on border enforcement 
issues.

The WTO, an international organization with 147 member states, is 
involved with IPR primarily through its administration of TRIPS. In 
addition to bringing formal TRIPS disputes to the WTO (discussed in the 
following section on strengthened foreign IPR laws), the U.S. 
government participates in the WTO's TRIPS Council. The council, which 
is comprised of all WTO members, is responsible for monitoring the 
operation of the TRIPS agreement and can be used by members as a forum 
for mutual consultation about TRIPS implementation. Recently the 
council has addressed issues such as TRIPS and public health.[Footnote 
25] A WTO IPR official stated that the U.S. government is the most 
active "pro-IPR" delegate during council activities. The U.S. 
government is also a major contributor to reviews of WTO members' 
overall country trade policies; these reviews are intended to 
facilitate the smooth functioning of the multilateral trading system by 
enhancing the transparency of members' trade policies.[Footnote 26] All 
WTO member countries are reviewed, and the frequency of each country's 
review varies according to its share of world trade. According to a 
USTR official in Geneva, IPR is often a central topic of discussion 
during the trade policy reviews, and the U.S. government poses 
questions regarding a country's compliance with TRIPS when relevant. 
The United States also provides input as countries take steps to accede 
to the WTO, and, according to the USTR official, IPR is always a 
primary issue during this process. As of June 2004, 26 countries were 
working toward WTO accession.

The Department of State, the Copyright Office, and USPTO actively 
participate in the activities of WIPO, a specialized United Nations 
agency with 180 member states that promotes the use and protection of 
intellectual property. Of particular note, WIPO is responsible for the 
creation of two "Internet treaties" that entered into force in 
2002.[Footnote 27] In addition, WIPO administers the 1970 Patent 
Cooperation Treaty (PCT), which makes it possible to seek patent 
protection for an invention simultaneously in each of a large number of 
countries by filing an "international" patent application. According to 
a WIPO Vice Director General, the State Department's U.S. Mission in 
Geneva and USPTO work closely with WIPO, and the U.S. government has 
actively participated in WIPO activities and monitored the use of 
WIPO's budget.[Footnote 28] The Copyright Office also participates in 
various activities of the WIPO General Assembly and WIPO committees and 
groups, including the WIPO Standing Committee on Copyright and Related 
Rights. USPTO has participated in WIPO efforts such as the negotiation 
of the Internet treaties (the Copyright Office was also involved in 
this effort) and also conducts joint USPTO-WIPO training events.

In addition, DHS works with the WCO regarding IPR protection. DHS 
participates in the WCO's IPR Strategic Group, which was developed as a 
joint venture with international business sponsors to help member 
customs administrations to improve the efficiency and effectiveness of 
their IPR border enforcement programs. The IPR Strategic Group meets 
quarterly to coordinate its activities, discuss current issues on IPR 
border enforcement, and advise member customs administrations regarding 
implementation of border measures under TRIPS. Further, a DHS official 
emphasized that DHS has been involved in drafting WCO model IPR 
legislation and strategic plans geared towards global IPR protection 
and otherwise helping foreign countries develop the tools necessary for 
effective border enforcement programs.

U.S. Officials Undertake Diplomatic Efforts to Protect Intellectual 
Property: 

In countries where IPR problems persist, U.S. government officials 
maintain a regular dialogue with foreign government representatives. In 
addition to the bilateral discussions that are held as a result of the 
Special 301 process and other specific initiatives, U.S. officials 
address IPR as part of regular bilateral relations. We also noted that 
U.S. government officials at U.S. embassies overseas take the 
initiative, in coordination with U.S. agencies in Washington, D.C., to 
pursue IPR with foreign officials. For example, according to officials 
at the U.S. Embassy in Moscow, the economic section holds interagency 
IPR coordination meetings and has met regularly with the Russian 
ministry responsible for IPR issues to discuss U.S. concerns. In 
Ukraine, State Department officials told us that they communicate 
regularly with the Ukraine government as part of a dialogue regarding 
the actions needed for the removal of Special 301 sanctions. U.S. 
embassies also undertake various public awareness activities and 
campaigns aimed at increasing support for intellectual property in the 
general public as well as among specific populations, such as law 
enforcement personnel, in foreign countries.[Footnote 29] Further, 
staff from the Departments of State and Commerce at U.S. embassies 
interact with U.S. companies overseas and work to assist them with 
commercial problems, including IPR concerns, and have at times raised 
specific industry concerns with foreign officials.[Footnote 30] 
Finally, a Justice official told us that during the past 2 years, 
Justice attorneys engaged high-level law enforcement officials in 
China, Brazil, and Poland in an effort to bolster coordination on 
cross-border IPR cases.

Diplomatic efforts addressing IPR have also included actions by senior 
U.S. government officials. For example, a senior official at the 
Commerce Department met in 2004 with the Brazilian minister responsible 
for industrial property issues, such as patents and trademarks, to 
discuss collaboration and technical assistance opportunities. In China, 
the U.S. Ambassador places a great emphasis on IPR and has organized an 
interagency task force that will work to implement an IPR Action Plan. 
In addition, presidential-level communication regarding IPR has 
occurred with some countries. For instance, according to Department of 
State sources, the Presidents of the United States and Russia discussed 
IPR, among other issues, when they met in September 2003. Further, USTR 
officials told us that the Presidents of the United States and Paraguay 
had IPR as an agenda item when they met in the fall of 2003.

Most Agencies Conduct IPR Training and Assistance Activities: 

Most of the agencies involved in efforts to promote or protect IPR 
overseas engage in some training or technical assistance activities. 
Key activities to develop and promote enhanced IPR protection in 
foreign countries are undertaken by the Departments of Commerce, 
Homeland Security, Justice, and State; the FBI; USPTO; the Copyright 
Office; and USAID. These agencies also participate in an IPR Training 
Coordination Group.

Training events sponsored by U.S. agencies to promote the enforcement 
of intellectual property rights have included enforcement programs for 
foreign police and customs officials, workshops on legal reform, and 
joint government-industry events. According to a State Department 
official, U.S. government agencies, including USPTO,[Footnote 31] the 
Department of Commerce's Commercial Law Development Program, the 
Departments of Justice and Homeland Security have conducted 
intellectual property training for a number of countries concerning 
bilateral and multilateral intellectual property commitments, 
including enforcement, during the past few years. For example, 
intellectual property training has been conducted by a number of 
agencies over the last year in Poland, China, Morocco, Italy, Jordan, 
Turkey, and Mexico. We attended a joint USPTO-WIPO training event in 
October 2003 in Washington, D.C., that covered U.S. and WTO patent, 
copyright, and trademark laws and enforcement. About 35 participants 
from numerous countries, ranging from supreme court judges to members 
of national police forces, attended the event. An official at the State 
Department observed that the Special 301 report is an important factor 
in determining training priorities. Other agency officials noted 
additional factors determining training priorities, including embassy 
input, cost, and requirements of trade and investment agreements. 
Although regularly sponsored by a single agency, individual training 
events often involve participants from other agencies and the private 
sector.

In addition to sponsoring seminars and short-term programs, agencies 
sponsor longer-term programs for developing improved intellectual 
property protection in other countries. For example, USAID funded two 
multiyear programs, the first of which began in 1996, aimed at 
improving the intellectual property regime in Egypt through public 
awareness campaigns, training, and technical assistance in developing 
intellectual property legislation and establishing a modern patent and 
trademark office. USAID has also sponsored longer-term bilateral 
programs that are aimed at promoting biotechnology and address relevant 
IPR issues such as plant variety protection. Private sector officials 
in Brazil told us that they believed the longer-term programs sponsored 
by USAID elsewhere would be helpful in Brazil. In addition to USAID, 
other U.S. agencies that sponsor training also provide other types of 
technical assistance in support of intellectual property rights. For 
example, the Copyright Office and USPTO revise and provide comments on 
proposed IPR legislation.[Footnote 32] Training and technical 
assistance activities that focus more broadly on institution building, 
biotechnology, organized crime, and other law enforcement issues may 
also support improved intellectual property enforcement.[Footnote 33]

Select Agencies Engage in U.S. IPR Law Enforcement Efforts: 

A small number of agencies are involved in enforcing U.S. intellectual 
property laws. Working in an environment where counterterrorism is the 
central priority, the FBI and the Departments of Justice and Homeland 
Security take actions that include engaging in multicountry 
investigations involving intellectual property violations and seizing 
goods that violate intellectual property rights at U.S. ports of entry. 
In addition, the USITC is responsible for some enforcement activities 
involving patents and trademarks.

U.S. Agencies Investigate IPR Violations: 

Although officials at the FBI, DHS, and Justice have emphasized that 
counterterrorism is the overriding law enforcement priority, these 
agencies nonetheless undertake IPR investigations that involve foreign 
connections. For example, the Department of Justice has an office that 
directly addresses international IPR problems.[Footnote 34] Justice has 
been involved with international investigation and prosecution efforts 
and, according to a Justice official, has become more aggressive in 
recent years. For example, Justice and the FBI recently coordinated an 
undercover IPR investigation, with the involvement of foreign law 
enforcement agencies. The investigation focused on individuals and 
organizations, known as "warez" release groups, that specialize in the 
Internet distribution of pirated materials. In April 2004, these 
investigations resulted in 120 simultaneous searches worldwide (80 in 
the United States) by law enforcement entities from 10 foreign 
countries[Footnote 35] and the United States in an effort known as 
"Operation Fastlink."[Footnote 36]

Law enforcement officials told us that IPR-related investigations with 
an international component can be instigated by, for example, industry 
complaints to agency headquarters or field offices. Investigations are 
pursued if criminal activity is suspected. U.S. officials noted that 
foreign law enforcement action may be encouraged by the U.S. government 
if an investigation results in evidence demonstrating that someone has 
violated U.S. law and if evidence in furtherance of the crime is 
located overseas. A Justice official added that international 
investigations are pursued when there is reason to believe that foreign 
authorities will take action and that additional impact, such as 
raising public awareness about IPR crimes, can be achieved. Evidence 
can be developed through investigative cooperation between U.S. and 
foreign law enforcement. In addition, the Justice official emphasized 
that the department also supports prosecutorial efforts in foreign 
countries. International cooperation between the United States and 
other countries can be facilitated through Mutual Legal Assistance 
Treaties (MLATs), which are designed to facilitate the exchange of 
information and evidence for use in criminal investigations and 
prosecutions.[Footnote 37] MLATs include the power to summon witnesses, 
compel production of documents and other real evidence, issue search 
warrants, and serve process. A Justice official emphasized that 
informal international cooperation can also be extremely productive.

Although investigations can result in international actions such as 
those cited above, law enforcement officials from the FBI told us that 
they cannot determine the number of past or present IPR cases with an 
international component because they do not track or categorize cases 
according to this factor. DHS officials emphasized that a key component 
of their enforcement authority is a "border nexus." Investigations have 
an international component established when counterfeit goods are 
brought into the United States, and DHS officials noted that it is a 
rare exception when DHS IPR investigations do not have an international 
component. However, DHS does not track cases by a specific foreign 
connection. The overall number of IPR-oriented investigations that have 
been pursued by foreign authorities as a result of DHS efforts is 
unknown.

Department of Homeland Security Seizes Items Violating IPR: 

DHS seizures of goods that violated IPR totaled more than $90 million 
in fiscal year 2003. While the types of imported products seized have 
varied little from year to year (in recent years, products such as 
cigarettes, wearing apparel, watches, and media products--CDs, DVDs, 
and tapes--have been key products), the value of seizures for some of 
these products has varied greatly. For example, in fiscal year 1999, 
the value of seized media products--for example, CDs, DVDs, and tapes-
-was, at nearly $40 million, notably higher than the value of any other 
product; by 2003, the value of seized counterfeit cigarettes, at more 
than $40 million, was by far the highest, while media products 
accounted for less than $10 million in seizures. Seizures of IPR-
infringing goods have involved imports primarily from Asia. In fiscal 
year 2003, goods from China accounted for about two-thirds of the value 
of all IPR seizures, many of them shipments of cigarettes.[Footnote 38] 
Other seized goods from Asia that year originated in Hong Kong and 
Korea. DHS has highlighted particular recent seizures, such as an 
estimated $500,000 in electrically heated coffee mugs bearing 
counterfeit Underwriters Laboratories (UL) labels and an estimated 
$644,000 in pirated video game CDs.[Footnote 39] A DHS official pointed 
out that providing protection against IPR-infringing imported goods for 
some U.S. companies--entertainment companies in particular--can be 
difficult, because companies often fail to record their trademarks and 
copyrights with DHS.

U.S. International Trade Commission Conducts Section 337 
Investigations: 

The USITC investigates and adjudicates Section 337 cases,[Footnote 40] 
which involve allegations of certain unfair practices in import trade, 
generally related to patent or registered trademark infringement. 
Although the cases must involve merchandise originating overseas, both 
complainants and respondents can be from any country as long as the 
complainant owns and exploits an intellectual property right in the 
United States. U.S. administrative law judges are responsible for 
hearing cases and issuing an initial decision, which is then reviewed 
and issued, modified, or rejected by the USITC. If a violation has 
occurred, remedies include directing DHS officials to exclude 
infringing articles from entering the United States. The USITC may 
issue cease-and-desist orders to the violating parties. Violations of 
cease-and-desist orders can result in civil penalties. As of June 2004, 
exclusion orders remained in effect for 51 concluded Section 337 
investigations, excluding from U.S. entry goods such as certain 
toothbrushes, memory chips, and video game accessories that were found 
to violate a U.S. intellectual property right.

U.S. Efforts Have Contributed to Improved Foreign IPR Laws, but 
Enforcement Overseas Remains Weak; Industry Supports U.S. Efforts: 

U.S. efforts have contributed to strengthened foreign IPR laws and 
international IPR obligations, and, while enforcement overseas remains 
weak, U.S. industry groups are generally supportive of U.S. efforts. 
U.S. actions are viewed as aggressive, and Special 301 is characterized 
as a useful tool in encouraging improvements overseas. However, the 
specific impact of many U.S. activities, such as diplomatic efforts or 
training and technical assistance, can be difficult to measure. 
Further, despite the progress that has been achieved, enforcement of 
IPR in many countries remains weak and, as a result, has become a U.S. 
government priority. Although U.S. industries recognize that problems 
remain, they acknowledge the many actions taken by the U.S. government, 
and industry representatives that we contacted in the United States and 
abroad were generally supportive of the U.S. efforts to pursue 
intellectual property protection overseas.

U.S. Efforts Have Contributed to Strengthened Foreign IPR Laws: 

Several representatives of major intellectual property industry 
associations stated that the United States is the most aggressive 
promoter of intellectual property rights in the world; an IPR official 
at the WTO concurred with this assessment, as did foreign officials. 
The efforts of U.S. agencies have contributed to the establishment of 
strengthened intellectual property legislation in many foreign 
countries.

The United States has realized progress through bilateral efforts. For 
example, the Special 301 review has been cited by industry as 
facilitating the introduction or strengthening of IPR laws around the 
world over the past 15 years. In the 2004 Special 301 report, USTR 
noted that Poland and the Philippines had recently passed optical disc 
legislation aimed at combating optical media piracy; the 2003 Special 
301 report had cited both countries for a lack of such legislation. 
Special 301 is cited by USTR and industry as an effective tool in 
alerting a country that it has trade problems with the United States, 
which is a key trading partner for numerous nations. Industry and USTR 
officials pointed out that countries are eager to avoid being publicly 
classified as problem nations. Further, according to U.S. government 
officials, incremental "invisible" changes take place behind the scenes 
as countries take actions to improve their standing on the Special 301 
listing prior to its publication. USTR notes that legislative 
improvements have been widespread but also cites other accomplishments, 
such as raids against pirates and counterfeiters in Poland and Taiwan, 
resulting from U.S. attention and the Special 301 process.

However, Special 301 can have an alienating effect when countries 
believe they have made substantial improvements in their IPR regimes 
but the report are still cites them as key problem countries. According 
to some officials we spoke with in Brazil and Ukraine, this happened in 
their countries. For example, although Ukrainian government officials 
we spoke with stated their desire to further respond to U.S. concerns, 
they expressed the view that the sanctions have run their course. They 
also said that the Ukrainian government cannot understand why Ukraine 
was targeted for sanctions while other countries where U.S. industry 
losses are higher have not been targeted. A USTR official responsible 
for IPR issues informed us that Ukraine was sanctioned because of IPR 
problems that the U.S. government views as serious.

Additional bilateral measures are cited as successful in encouraging 
new improvements overseas in the framework for IPR protection. For 
example, following a 1998 U.S. executive order directing U.S. 
government agencies to ensure the legitimate use of software, USTR then 
addressed this issue with foreign governments and has reportedly 
achieved progress in addressing this violation of IPR. According to 
USTR, more than 20 foreign governments have issued decrees mandating 
that government ministries use only authorized software. As another 
example, the negotiation of FTAs has been cited by government and IPR 
industry officials as a useful tool, particularly as such agreements 
require IPR protections, including protection for digital products, 
beyond what is required in TRIPS. However, because most FTAs have been 
negotiated within the past 5 years, their long-term impact remains to 
be seen.

U.S. efforts through multilateral forums have also had positive 
effects. For example, as a result of TRIPS obligations--which the U.S. 
government was instrumental in negotiating--many developing countries 
have improved their statutory systems for the protection of 
intellectual property. For example, China revised its intellectual 
property laws and regulations to meet its WTO TRIPS commitments. 
Further, in Ukraine and Russia, government officials told us that 
improvements to their IPR legislation was part of a movement to accede 
to the WTO. U.S. agencies have assisted other developing countries in 
drafting TRIPS-compliant laws.

In addition, a WTO member country can bring disputes over TRIPS 
compliance to the WTO through that organization's dispute settlement 
mechanism. The U.S. government has exercised this right and brought 
more TRIPS cases to the WTO for resolution than any other WTO member. 
Since 1996, the United States has brought a total of 12 TRIPS-related 
cases against 11 countries[Footnote 41] and the European Community (EC) 
to the WTO (see app. III for a listing of these cases). Of these cases, 
8 were resolved before going through the entire dispute settlement 
process by mutually agreed solutions between the parties--the preferred 
outcome, according to a USTR official. In nearly all of these cases, 
U.S. concerns were addressed via changes in laws or regulations by the 
other party. Only 2 have resulted in the issuance of a final decision, 
or panel report, both of which were favorable rulings for the United 
States.[Footnote 42] In a case involving Argentina, consultations 
between the countries are ongoing and the case has been partially 
settled, and another case regarding an EC regulation protecting 
geographical indications is currently in panel proceedings.[Footnote 
43]

Impact of Many Activities Can Be Difficult to Measure: 

Despite the fact that persistent U.S. efforts have contributed to 
positive developments, it can be difficult to precisely measure the 
impact of specific U.S. activities such as policy efforts or training 
assistance programs. U.S. activities are not conducted in isolation, 
but are part of the spectrum of political considerations in a foreign 
country. Although regular efforts such as the annual Special 301 review 
or diplomatic contact may create incentives for countries to improve 
intellectual property protection, other factors, such as countries' own 
political interests, may contribute to or hinder improvements. 
Therefore, it can be difficult to measure changes resulting from U.S. 
efforts alone. For example, China revised its intellectual property 
laws as a result of its accession to WTO. Although China had for some 
time been under pressure from the United States to improve its 
intellectual property protection, revisions to its intellectual 
property legislation were also called for by its newly acquired WTO 
commitments. Thus, it is nearly impossible to attribute any of these 
developments to particular factors or to precisely measure the 
influence of individual factors on China's decision to reform. Further, 
officials at the U.S. Embassy in Moscow have emphasized that the 
regular U.S. focus on IPR issues has raised the profile of the issue 
with the Russian government--a positive development. However, once 
again, it is difficult to determine the specific current and future 
effects of this development on intellectual property protection. 
Nonetheless, despite these limitations, several agency officials we 
spoke with said that these activities are important and contribute to 
incremental changes in IPR protection (such as legislative improvements 
to Russia's copyright law that were enacted in July 2004). A Commerce 
official also noted that regular contacts by U.S. government officials 
with their foreign counterparts have apparently helped some individual 
U.S. companies seeking to defend patent or trademark rights overseas by 
reminding foreign officials that their administrative proceedings for 
such protection are under U.S. scrutiny.

Regarding training activities, officials at agencies that provide 
regular training reported using post-training questionnaires by 
attendees to evaluate the trainings, but several noted that beyond 
these efforts, assessing the impact of trainings is challenging. An 
official at USPTO stated that although he does not believe it is 
possible to quantify fully the impact of USPTO training programs, 
accumulated anecdotal evidence from embassies and the private sector 
has led the office to believe that the activities are useful and have 
resulted in improvements in IPR enforcement. USPTO recently began 
sending impact evaluation questionnaires to training attendees 1 year 
after the training, to try to gather more information on long-term 
impact. However, a low response rate has thus far limited the 
effectiveness of this effort. Officials from the Departments of State 
and Commerce also pointed out anecdotal evidence that training and 
technical assistance activities are having a positive impact on the 
protection of intellectual property overseas. Although some industry 
officials raised criticisms or offered suggestions for improving 
training, including using technology to offer more long-distance 
training and encouraging greater USAID involvement in coordination 
efforts, many were supportive of U.S. training efforts.

Enforcement Overseas Remains Weak: 

Despite improvements in intellectual property laws, the enforcement of 
intellectual property rights remains weak in many countries, and U.S. 
government and industry sources note that improving enforcement 
overseas is now a key priority. USTR's most recent Special 301 report 
states that "although several countries have taken positive steps to 
improve their IPR regimes, the lack of IPR protection and enforcement 
continues to be a global problem." For example, although the Chinese 
government has improved its statutory IPR regime, USTR remains 
concerned about enforcement in that country. According to USTR, 
counterfeiting and piracy remain rampant in China and increasing 
amounts of counterfeit and pirated products are being exported from 
China. USTR's 2004 Special 301 report states that "[a]ddressing weak 
IPR protection and enforcement in China is one of the Administration's 
top priorities." Further, Brazil has adopted modern copyright 
legislation that appears to be generally consistent with TRIPS, but it 
has not undertaken adequate enforcement actions, according to USTR's 
2003 Special 301 Report. In addition, as noted above, although Ukraine 
has shut down offending domestic optical media production facilities, 
pirated products continue to pervade Ukraine, and, according to USTR's 
2004 Special 301 Report, Ukraine is also a major trans-shipment point 
and storage location for illegal optical media produced in Russia and 
elsewhere as a result of weak border enforcement efforts (see fig. 1). 
An industry official pointed out that addressing foreign enforcement 
problems is a difficult issue for the U.S. government.

Figure 1: Pirated DVDs from Brazil, China, and Ukraine: 

[See PDF for image] 

[End of figure] 

Although U.S. law enforcement does undertake international cooperative 
activities to enforce intellectual property rights overseas, executing 
these efforts can prove difficult. For example, according to DHS and 
Justice officials, U.S. efforts to investigate IPR violations overseas 
are complicated by a lack of jurisdiction as well as by the fact that 
U.S. officials must convince foreign officials to take action. Further, 
a DHS official noted that in some cases, activities defined as criminal 
in the United States are not viewed as an infringement by other 
countries, and U.S. law enforcement agencies can therefore do nothing. 
In particular, this official cited China as a country that has not 
cooperated in investigating IPR violations. However, according to DHS, 
recently the Chinese government assisted DHS in an undercover IPR 
criminal investigation (targeting a major international counterfeiting 
network that distributed counterfeit motion pictures worldwide) that 
resulted in multiple arrests and seizures.[Footnote 44]

While less constrained than law enforcement, training and technical 
assistance activities may also be unable to achieve the desired 
improvements in IPR enforcement in some cases, even when considerable 
U.S. assistance is provided. For example, despite USAID's long-term 
commitment to strengthening IPR protection in Egypt with training and 
technical assistance programs, Egypt was elevated to the Priority Watch 
List in the 2004 Special 301 report and IPR enforcement problems 
clearly persist.

Industry Generally Supports U.S. Efforts, Despite Worsening Problems in 
Some Areas: 

Despite the weakness of IPR enforcement in many countries, industry 
groups representing intellectual property concerns for U.S. industries 
we contacted were generally supportive of U.S. government efforts to 
protect U.S. intellectual property overseas. Numerous industry 
representatives in the U.S. and overseas expressed satisfaction with a 
number of U.S. activities as well as with their interactions and 
collaborations with U.S. agencies and embassies in support of IPR. 
Industry representatives have been particularly supportive of the 
Special 301 process, and many credited it for IPR improvements 
worldwide. According to an official from a key industry association, 
Special 301 "is a great statutory tool, it leads to strong and 
effective interagency coordination, and it gets results." Industry 
associations overseas and in the U.S. support the Special 301 process 
with information based on their experiences in foreign countries. An 
entertainment software industry official stated that the U.S. 
government has "consistently demonstrated their strong and continuing 
commitment to creatorspressing for the highest attainable standards of 
protection for intellectual property rights.One especially valuable 
tool has been the Special 301 review process." Other representatives 
have advocated increased use of leverage provided by trade preference 
programs, particularly the GSP program.

Industry association officials in the United States and private sector 
officials in Brazil, Russia, and Ukraine also expressed support for 
U.S. IPR training activities, despite limited evidence of long-term 
impact. Industry associations regularly collaborate with U.S. agencies 
to sponsor and participate in training events for foreign officials. A 
number of government and law enforcement officials in our case study 
countries commented that training and seminars sponsored by the U.S. 
government were valuable as forums for learning about IPR. Others, 
including private sector officials, commented on the importance of 
training as an opportunity for networking with other officials and 
industry representatives concerned with IPR enforcement. Nonetheless, 
some industry officials acknowledged that U.S. actions cannot always 
overcome challenges presented by political and economic factors in 
other countries.

Industry support occurs in an environment where, despite improvements 
such as strengthened foreign IPR legislation, the situation may be 
worsening overall for some intellectual property sectors. For example, 
according to copyright industry estimates, losses due to piracy grew 
markedly in recent years. The entertainment and business software 
sectors, for example, which are very supportive of USTR and other 
agencies, face an environment where their optical media products are 
increasingly easy to reproduce, and digitized products can be 
distributed around the world quickly and easily via the Internet. 
According to an intellectual property association representative, 
counterfeiting trademarks has also become more pervasive in recent 
years. Counterfeiting affects more than just luxury goods; it also 
affects various industrial goods.

Several Mechanisms Coordinate IPR Efforts, but Their Usefulness Varies: 

Several interagency mechanisms exist to coordinate overseas 
intellectual property policy initiatives, development and assistance 
activities, and law enforcement efforts, although these mechanisms' 
level of activity and usefulness varies. The mechanisms include 
interagency coordination on trade (IPR) issues; the IPR Training 
Coordination Group, which maintains a database of training activities; 
the National Intellectual Property Law Enforcement Coordination 
Council; and the National IPR Coordination Center. Apart from formal 
coordination bodies, regular, informal communication and coordination 
regarding intellectual property issues also occurs among policy 
agencies in the United States and in overseas embassies and is viewed 
as important to the coordination process.

Formal Interagency Coordination Mechanism Viewed as Working Well: 

According to government and industry officials, an interagency trade 
policy mechanism established by Congress has operated effectively in 
reviewing IPR issues (see fig. 2). In 1962, the Congress established 
the mechanism to assist USTR in developing policy on trade and trade-
related investment, and the annual Special 301 review is conducted with 
this tool.[Footnote 45] Three tiers of committees constitute the 
principal mechanism for developing and coordinating U.S. government 
positions on international trade, including IPR. The Trade Policy 
Review Group (TPRG) and the Trade Policy Staff Committee (TPSC), 
administered and chaired by USTR, are the subcabinet interagency trade 
policy coordination groups that participate in trade policy 
development.[Footnote 46] More than 80 working-level subcommittees are 
responsible for providing specialized support for the TPSC.

One of the specialized subcommittees is central to conducting the 
annual Special 301 review and determining the results of the review. 
During the 2004 review, which began early in the year, the Special 301 
subcommittee met formally seven times, according to a USTR 
official.[Footnote 47] The subcommittee reviewed responses to a Federal 
Register request for information about intellectual property problems 
around the world; it also reviewed responses to a cable sent to every 
U.S. embassy soliciting specific information on IPR issues. IPR 
industry associations provided lengthy, detailed submissions to the 
U.S. government during the Special 301 review; such submissions 
identify IPR problems in countries around the world and are an 
important component in making a determination as to which countries 
will be cited in the final report. After reaching its own decisions on 
country placement, the subcommittee submitted its proposal to the Trade 
Policy Staff Committee. The TPSC met twice and submitted its 
recommendations to the TPRG for final approval. The TPRG reached a 
final decision via e-mail, and the results of this decision were 
announced with the publication of the Special 301 report on May 3, 
2004. The entire process for 2004 is considered typical of how the 
annual process is usually conducted. In addition, this subcommittee can 
meet at other times to address IPR issues as appropriate.

According to U.S. government and industry officials, this interagency 
process is rigorous and effective. A USTR official stated that the 
Special 301 subcommittee is very active, and subcommittee leadership 
demonstrates a willingness to revisit issues raised by other agencies 
and reconsider positions. A Commerce official told us that the Special 
301 review is one of the best tools for interagency coordination in the 
government and that the review involves a "phenomenal" amount of 
communication. A Copyright Office official noted that coordination 
during the review is frequent and effective. A representative for 
copyright industries also told us that the process works well and is a 
solid interagency effort.

Figure 2: U.S. Agency Participation in Coordination Mechanisms: 

[See PDF for image] 

[A] While 22 government bodies are invited to participate in this 
effort, we are only listing those agencies included in our report.

[B] The U.S. Patent and Trademark Office does not vote separate and 
apart from the Department of Commerce.

[C] Consulted.

[D] Not a voting member.

[E] The two agencies share joint leadership of the center.

[End of figure] 

IPR Training Coordination Group Facilitates Collaboration, though 
Database Is Incomplete: 

The IPR Training Coordination Group, intended to inform its 
participants about IPR training activities and facilitate 
collaboration, developed a database to record and track training 
events, but we found that the database was incomplete. This voluntary, 
working-level group comprises representatives of U.S. agencies and 
industry associations involved in IPR programs and training and 
technical assistance efforts overseas or for foreign officials. 
Meetings are held approximately every 4 to 6 weeks and are well 
attended by government and private sector representatives. The State 
Department leads the group and supplies members with agendas and 
meeting minutes. Training Coordination Group meetings in 2003 and 2004 
have included discussions on training "best practices," responding to 
country requests for assistance, and improving IPR awareness among 
embassy staff. According to several agency and private sector 
participants, the group is a useful mechanism that keeps participants 
informed of the IPR activities of other agencies or associations and 
provides a forum for coordination.

Since it does not independently control budgetary resources, the group 
is not responsible for sponsoring or evaluating specific U.S. 
government training events. One agency official noted that, partly 
owing to the lack of funding coordination, the training group serves 
more as a forum to inform others regarding already-developed training 
plans than as a group to actively coordinate training activities across 
agencies. Officials at the Department of Commerce's Commercial Law 
Development Program and USPTO commented that available funds, more than 
actual country needs, often determine what training they are able to 
offer. A private sector official also voiced this concern, and several 
agency and industry officials commented that more training 
opportunities were needed.[Footnote 48] A Justice official also noted 
that if there were more active interagency consultations, training 
could be better targeted to countries that need criminal enforcement 
training.

The Training Coordination Group helped develop a public training 
database,[Footnote 49] which it uses as a resource to identify planned 
activities and track past efforts. However, although the database has 
improved in recent years to include more training events and better 
information, it remains incomplete. Officials from the Copyright Office 
and USPTO stated that the database should contain records of all of 
their training efforts, but officials from other agencies, including 
the Departments of Commerce, State, and Justice, and the FBI, 
acknowledged that it might not record all the training events they have 
conducted. Although the group's meetings help to keep the database 
updated by identifying upcoming training offered by members that have 
not been entered into the database, training activities that are not 
raised at the meeting or that are sponsored by embassies or an agency 
not in attendance may be overlooked. In addition, USAID submits 
training information only once per year at the conclusion of its own 
data-gathering exercise. Since USAID is a major sponsor of training 
activities--in 2002, according to the database, USAID sponsored or 
cosponsored nearly one-third of the total training events--the lack of 
timely information is notable. Several members expressed frustration 
that USAID does not contribute to the database regularly and inform the 
group about training occurring through its missions. USAID officials 
noted that the decentralization of their agency makes it difficult for 
them to address these concerns, because individual missions plan and 
implement training and technical assistance activities independently.

Council to Coordinate IPR Enforcement Has Had Little Impact: 

The National Intellectual Property Law Enforcement Coordination Council 
(NIPLECC), created by the Congress in 1999 to coordinate domestic and 
international intellectual property law enforcement among U.S. federal 
and foreign entities, seems to have had little impact. NIPLECC consists 
of (1) the Under Secretary of Commerce for Intellectual Property and 
Director of the United States Patent and Trademark Office; (2) the 
Assistant Attorney General, Criminal Division; (3) the Under Secretary 
of State for Economic and Agricultural Affairs; (4) the Deputy United 
States Trade Representative; (5) the Commissioner of Customs; and (6) 
the Under Secretary of Commerce for International Trade. NIPLECC is 
also required to consult with the Register of Copyrights on law 
enforcement matters relating to copyright and related rights and 
matters. NIPLECC's authorizing legislation did not include the FBI as a 
member of NIPLECC, despite its pivotal role in law enforcement. 
However, according to representatives of the FBI, USPTO, and Justice, 
the FBI should be a member. NIPLECC, which has no independent staff or 
budget, is cochaired by USPTO and Justice. In the council's nearly 4 
years of existence, its primary output has been three annual reports to 
the Congress, which are required by statute.

In its first year, according to the first annual report, NIPLECC met 
four times to begin shaping its agenda. It also consulted with industry 
and accepted written comments from the public related to what matters 
the council should address and how it should structure council-industry 
cooperation. It drafted a working paper detailing draft goals and 
proposed activities for the council. Goals and activities identified in 
the first report were "draft" only, because of the imminent change in 
administration. Although left open for further consideration, the 
matters raised in this report were not specifically addressed in any 
subsequent NIPLECC reports.

NIPLECC's second annual report states that the council's mission 
includes "law enforcement liaison, training coordination, industry and 
other outreach and increasing public awareness."[Footnote 50] In 
particular, the report says, the council "determined that efforts 
should focus on a campaign of public awareness, at home and 
internationally, addressing the importance of protecting intellectual 
property rights." However, other than a one-page executive summary of 
NIPLECC's basic mission, the body of the second annual report consists 
entirely of individual agencies' submissions on their activities and 
details no activities undertaken by the council. NIPLECC met twice in 
the year between the first and second reports.

The third annual report also states that "efforts should focus on a 
campaign of public awareness, at home and internationally, addressing 
the importance of intellectual property rights."[Footnote 51] Although 
this is identical to the language in the previous year's report, there 
is little development of the theme, and no evidence of actual progress 
over the course of the previous year. Like the previous year's report, 
other than a single-page executive summary, the body of the report 
consists of individual agency submissions detailing agency efforts, not 
the activities or intentions of the council. The report does not 
provide any detail about how NIPLECC has, in its third year, 
coordinated domestic and international intellectual property law 
enforcement among federal and foreign entities.

Under its authorizing legislation, NIPLECC has a broad mandate. 
According to interviews with industry officials and officials from 
NIPLECC member agencies, and as evidenced by its own legislation and 
reports, NIPLECC continues to struggle to define its purpose and has as 
yet had little discernable impact. Indeed, officials from more than 
half of the member agencies offered criticisms of the NIPLECC, 
remarking that it is unfocused, ineffective, and "unwieldy." In 
official comments to the council's 2003 annual report, major IPR 
industry associations expressed a sense that NIPLECC is not undertaking 
any independent activities or effecting any impact. One industry 
association representative stated that there is a need for law 
enforcement to be made more central to U.S. IPR efforts and said that 
although he believes the council was created to deal with this issue, 
it has "totally failed." The lack of communication regarding 
enforcement results in part from complications such as concerns 
regarding the sharing of sensitive law enforcement information and from 
the different missions of the various agencies involved in intellectual 
property actions overseas. According to an official from USPTO, NIPLECC 
is hampered primarily by its lack of independent staff and funding. He 
noted, for example, a proposed NIPLECC initiative for a domestic and 
international public awareness campaign that has not been implemented 
owing to insufficient funds. According to a USTR official, NIPLECC 
needs to define a clear role in coordinating government policy. A 
Justice official stressed that, when considering coordination, it is 
important to avoid creating an additional layer of bureaucracy that may 
detract from efforts devoted to each agency's primary mission. This 
official also commented that while NIPLECC's stated purpose of 
enhancing interagency enforcement coordination has not been achieved, 
the shortcomings of NIPLECC should not suggest an absence of effective 
interagency coordination elsewhere.

Despite NIPLECC's difficulties thus far, we heard some positive 
comments regarding this group. For example, an official from USPTO 
noted that the IPR training database web site resulted from NIPLECC 
efforts. Further, an official from the State Department commented that 
NIPLECC has had some "trickle-down" effects, such as helping to 
prioritize the funding and development of the intellectual property 
database at the State Department. Although NIPLECC principals meet 
infrequently and NIPLECC has undertaken few concrete activities, this 
official noted that NIPLECC is the only forum for bringing enforcement, 
policy, and foreign affairs agencies together at a high level to 
discuss intellectual property issues. A USPTO official stated that 
NIPLECC has potential, but needs to be "energized."

National IPR Coordination Center Is Not Widely Used by Industry: 

The National IPR Coordination Center (the IPR Center) in Washington, 
D.C., a joint effort between DHS and the FBI, began limited operations 
in 2000.[Footnote 52] According to a DHS official, the coordination 
between DHS, the FBI, and industry and trade associations makes the IPR 
Center unique. The IPR Center is intended to serve as a focal point for 
the collection of intelligence involving copyright and trademark 
infringement, signal theft, and theft of trade secrets. Center staff 
analyze intelligence that is collected through industry referrals of 
complaints (allegations of IPR infringements) and, if criminal activity 
is suspected, provide the information for use by FBI and DHS field 
components. The FBI at the IPR Center holds quarterly meetings with 11 
priority industry groups to discuss pressing issues on violations 
within the specific jurisdiction of the FBI. Since its creation, the 
IPR Center has received 300 to 400 referrals, according to an IPR 
Center official. The center is also involved in training and outreach 
activities. For example, according to IPR Center staff, between May 
2003 and April 2004, personnel from the center participated in more 
than 16 IPR training seminars and conducted 22 outreach events.

The IPR Center is not widely used by industry. An FBI official 
associated with the IPR Center estimated that about 10 percent of all 
FBI industry referrals come through the center rather than going 
directly to FBI field offices. DHS officials noted that "industry is 
not knocking the door down" and that the IPR Center is perceived as 
underutilized. An FBI official noted that the IPR Center is functional 
but that it generally provides training, outreach, and intelligence to 
the field rather than serving as a primary clearinghouse for referral 
collection and review. The IPR Center got off to a slow start partly 
because, according to an FBI official, after the events of September 
11, 2001, many IPR Center staff were reassigned, and the center did not 
become operational until 2002. The IPR Center is authorized for 24 
total staff (16 from DHS and 8 from the FBI); as of July 2004, 20 staff 
(13 DHS, 7 FBI) were "on board" at the center, according to an IPR 
Center official. This official noted that the center's use has been 
limited by the fact that big companies have their own investigative 
resources, and not all small companies are familiar with the IPR 
Center.[Footnote 53]

Informal Coordination Is Considered Important among Policy Agencies: 

In addition to the formal coordination efforts described, policy agency 
officials noted the importance of informal but regular communication 
among staff at the various agencies involved in the promotion or 
protection of intellectual property overseas. Several officials at 
various policy-oriented agencies, such as USTR and the Department of 
Commerce, noted that the intellectual property community was small and 
that all involved were very familiar with the relevant policy officials 
at other agencies in Washington, D.C. One U.S. government official 
said, "No one is shy about picking up the phone." Further, State 
Department officials at U.S. embassies also regularly communicate with 
Washington, D.C. agencies regarding IPR matters and U.S. government 
actions. Agency officials noted that this type of coordination is 
central to pursuing U.S. intellectual property goals overseas.

Although communication between policy and law enforcement agencies can 
occur through forums such as the NIPLECC, these agencies do not share 
specific information about law enforcement activities systematically. 
According to an FBI official, once a criminal investigation begins, 
case information stays within the law enforcement agencies and is not 
shared. A Justice official emphasized that criminal enforcement is 
fundamentally different from the activities of policy agencies and that 
restrictions exist on Justice's ability to share investigation 
information, even with other U.S. agencies. Law enforcement agencies 
share investigation information with other agencies on an "as-needed" 
basis, and a USTR official said that there is no systematic means for 
obtaining information on law enforcement cases with international 
implications. An official at USPTO commented that coordination between 
policy and law enforcement agencies should be "tighter" and that both 
policy and law enforcement could benefit from improved communication. 
For example, in helping other countries draft IPR laws, policy 
officials could benefit from information on potential law enforcement 
obstacles identified by law enforcement officials.

Officials at the Department of State and USTR identified some formal 
and informal ways that law enforcement information may be incorporated 
into policy discussions and activities. They noted that enforcement 
agencies such as Justice and DHS participate in the formal Special 301 
review and that officials at embassies or policy agencies consult and 
make use of the publicly available DHS seizure data on IPR-violating 
products.[Footnote 54] For example, a USTR official told us that USTR 
had raised seizures at U.S. borders in bilateral discussions with the 
Chinese. Discussions addressed time-series trends, both on an absolute 
and percentage basis, for the overall seizure figures available from 
DHS. This official noted that the agency will generally raise seizure 
figures with a foreign country if that country is a major violator, has 
consistently remained near the top of the list of: 

violators, and/or has increasingly been the source of seized 
goods.[Footnote 55] In addition, a Justice official noted that the 
department increasingly engages in policy activities, such as the 
Special 301 annual review and the negotiation of free trade agreements, 
as well as training efforts, to improve coordination between policy and 
law enforcement agencies and to strengthen international IPR 
enforcement.

U.S. Government Faces Challenges to Further Progress: 

The impact of U.S. activities is challenged by numerous factors. For 
example, internally, competing U.S. policy objectives can affect how 
much the U.S. government can accomplish. Beyond internal factors, the 
willingness of a foreign country to cooperate in improving its IPR is 
affected by that country's domestic policy objectives and economic 
interests, which may complement or conflict with U.S. objectives. In 
addition, many economic factors, including low barriers to entering the 
counterfeiting and piracy business and large price differences between 
legitimate and fake goods as well as problems such as organized crime, 
pose challenges to U.S. and foreign governments' efforts, even in 
countries where the political will for protecting intellectual property 
exists.

U.S. Government Faces Internal Constraints: 

Because intellectual property protection is one among many objectives 
that the U.S. government pursues overseas, it is viewed in the context 
of broader U.S. foreign policy interests where other objectives may 
receive a higher priority at certain times in certain countries. 
Industry officials with whom GAO met noted, for example, their belief 
that policy priorities related to national security were limiting the 
extent to which the United States undertook activities or applied 
diplomatic pressure related to IPR issues in some countries. Officials 
at the Department of Justice and the FBI also commented that 
counterterrorism, not IPR, is currently the key priority for law 
enforcement. Further, although industry is supportive of U.S. efforts, 
many industry representatives commented that U.S. agencies need to 
increase the resources available to better address IPR issues overseas.

Lack of Support in Foreign Countries Can Limit U.S. Efforts' Impact: 

The impact of U.S. activities is affected by a country's own domestic 
policy objectives and economic interests, which may complement or 
conflict with U.S. objectives. U.S. efforts are more likely to be 
effective in encouraging government action or achieving impact in a 
foreign country if support for intellectual property protection exists 
there. Groups in a foreign country whose interests align with that of 
the United States can bolster U.S. efforts. For example, combating 
music piracy in Brazil has gained political attention and support 
because Brazil has a viable domestic music industry and thus has 
domestic interests that have become victims of widespread piracy. 
Further, according to a police official in Rio de Janeiro, efforts to 
crack down on street vendors are motivated by the loss of tax revenues 
from the informal economy. The unintended effect of these local 
Brazilian efforts has been a crackdown on counterfeiting activities 
because the informal economy is often involved in selling pirated and 
counterfeit goods on the streets. Likewise, the Chinese government has 
been working with a U.S. pharmaceutical company on medicines safety 
training to reduce the amount of fake medicines produced in China (see 
fig. 3).

Figure 3: Counterfeit and Legitimate Chinese Pharmaceutical Products: 

[See PDF for image] 

[End of figure] 

However, U.S. efforts are less likely to achieve impact if no such 
domestic support exists in other nations. Although U.S. options such as 
removing trade preference program benefits, considering trade 
sanctions, or visibly publicizing weaknesses in foreign IPR protection 
can provide incentives for increased protection of IPR, such policies 
may not be sufficient alone to counter existing incentives in foreign 
countries. In addition, officials in some countries view providing 
strong intellectual property protection as an impediment to 
development. A Commission on Intellectual Property Rights (established 
by the British government) report points out that strong IPR can allow 
foreign firms selling to developing countries to drive out domestic 
competition by obtaining patent protection and to service the market 
through imports rather than domestic manufacture, or that strong 
intellectual property protection increases the costs of essential 
medicines and agricultural inputs, affecting poor people and farmers 
particularly negatively. A lack of "political will" to enact IPR 
protections makes it difficult for the U.S. government to achieve 
impact in locations where a foreign government maintains such 
positions.

Economic Factors and Involvement of Organized Crime Pose Additional 
Challenges: 

Many economic factors complicate and challenge U.S. and foreign 
governments' efforts, even in countries where the political will for 
protecting intellectual property exists. These factors include low 
barriers to entering the counterfeiting and piracy business and 
potentially high profits for producers. For example, one industry 
pointed out that it is much more profitable to buy and resell software 
than to sell cocaine. In addition, the low prices of fake products are 
attractive to consumers. The economic incentives can be especially 
acute in countries where people have limited income. Moreover, 
technological advances allowing for high-quality inexpensive and 
accessible reproduction and distribution in some industries have 
exacerbated the problem. Further, many government and industry 
officials also believe the chance of getting caught for counterfeiting 
and piracy, as well as the penalties even if caught, are too low. For 
example, FBI officials pointed out that domestic enforcement of 
intellectual property laws has been weak, and consequently the level of 
deterrence has been inadequate. These officials said that criminal 
prosecutions and serious financial penalties are necessary to deter 
intellectual property violations.

The increasing involvement of organized crime in the production and 
distribution of pirated products further complicates enforcement 
efforts. Federal and foreign law enforcement officials have linked 
intellectual property crime to national and transnational organized 
criminal operations. According to the Secretary General of Interpol, 
intellectual property crime is now dominated by criminal organizations, 
and law enforcement authorities have identified some direct and some 
alleged links between intellectual property crime and paramilitary and 
terrorist groups.[Footnote 56] Justice Department officials noted that 
they are aware of the allegations linking intellectual property crime 
and terrorist funding and that they are actively exploring all 
potential avenues of terrorist financing, including through 
intellectual property crime. However, to date, U.S. law enforcement has 
not found solid evidence that intellectual property has been or is 
being pirated in the United States by or for the benefit of terrorists. 
The involvement of organized crime increases the sophistication of 
counterfeiting operations, as well as the challenges and threats to law 
enforcement officials confronting the violations. Moreover, according 
to officials in Brazil, organized criminal activity surrounding 
intellectual property crime is linked with official corruption, which 
can pose an additional obstacle to U.S. and foreign efforts to promote 
enhanced enforcement.

Many of these challenges are evident in the optical media industry, 
which includes music, movies, software, and games. Even in countries 
where interests exist to protect domestic industries, such as the 
domestic music industry in Brazil or the domestic movie industry in 
China, economic and law enforcement challenges can be difficult to 
overcome. For example, the cost of reproduction technology and copying 
digital media is low, making piracy an attractive employment 
opportunity, especially in a country where formal employment is hard to 
obtain. According to the Business Software Alliance, a CD recorder is 
relatively inexpensive (less than $1,000). The huge price differentials 
between pirated CDs and legitimate copies also create incentives on the 
consumer side. For example, when we visited a market in Brazil, we 
observed that the price for a legitimate DVD was approximately ten 
times the price for a pirated DVD. Even if consumers are willing to pay 
extra to purchase the legitimate product, they may not do so if the 
price differences are too great for similar products. We found that 
music companies have experimented with lowering the price of legitimate 
CDs in Russia and Ukraine.[Footnote 57] A music industry representative 
in Ukraine told us that this strategy is intended to make legitimate 
products really affordable to consumers. However, whether this program 
is successful in gaining market share and reducing sales of pirated CDs 
is unclear. During our visit to a large Russian marketplace, a vendor 
encouraged us to purchase a pirated CD despite the fact that she also 
had the same CD for sale under the legitimate reduced-price program. 
Further, the potentially high profit makes optical media piracy an 
attractive venture for organized criminal groups. Industry and 
government officials have noted criminal involvement in optical media 
piracy and the resulting law enforcement challenges.

Recent technological advances have also exacerbated optical media 
piracy. The mobility of the equipment makes it easy to transport it to 
another location, further complicating enforcement efforts. Industry 
and government officials described this phenomenon as the "whack-a-
mole" problem,[Footnote 58] noting that when progress is made in one 
country, piracy operations often simply move to a neighboring location. 
According to a Ukraine official, many production facilities moved to 
Russia after Ukraine started closing down CD plants. These economic 
incentives and technological developments have resulted in particularly 
high rates of piracy in the optical media sector. Likewise, the 
Internet provides a means to transmit and sell illegal software or 
music on a global scale. According to an industry representative, the 
ability of Internet pirates to hide their identities or operate from 
remote jurisdictions often makes it difficult for IPR holders to find 
them and hold them accountable.

Conclusions: 

To seek improved protection of U.S. intellectual property in foreign 
countries, U.S. agencies make use of a wide array of tools and 
opportunities, ranging from routine discussions with foreign government 
officials, to trade sanctions, to training and technical assistance, to 
presidential-level dialogue. The U.S. government has demonstrated a 
commitment to addressing IPR issues in foreign countries using multiple 
agencies and U.S. embassies overseas. However, law enforcement actions 
are more restricted than other U.S. activities, owing to factors such 
as a lack of jurisdiction overseas to enforce U.S. law. U.S. agencies 
and industry communicate regularly, and industry provides important 
support for various agency activities.

Although the results of U.S. efforts to secure improved intellectual 
property protection overseas often cannot be precisely identified, the 
U.S. government is clearly and consistently engaged in this area and 
has had a positive impact. Agency and industry officials have cited the 
Special 301 review most frequently as the U.S. government tool that has 
facilitated IPR improvements overseas. The effects of U.S. actions are 
most evident in strengthened foreign IPR legislation and new 
international obligations. Industry clearly supports U.S. efforts, 
recognizing that they have contributed to improvements such as 
strengthened IPR laws overseas. U.S. efforts are now focused on 
enforcement, since effective enforcement is often the weak link in 
intellectual property protection overseas and the situation is 
deteriorating for some industries.

Several IPR coordination mechanisms exist, with the interagency 
coordination that occurs during the Special 301 process standing out as 
the most significant and active. Of note, the Training Coordination 
Group is a completely voluntary effort and is generally cited as a 
positive development. Further, the database created by this group is 
useful, although it remains incomplete. Conversely, the mechanism for 
coordinating intellectual property law enforcement, NIPLECC, has 
accomplished little that is concrete. Currently, little compelling 
information demonstrates a unique role for this group, bringing into 
question its effectiveness. In addition, it does not include the FBI, a 
primary law enforcement agency. Members, including NIPLECC leadership, 
have repeatedly acknowledged that the group continues to struggle to 
find an appropriate mission.

As agencies continue to pursue IPR improvements overseas, they will 
face daunting challenges. These challenges include the need to create 
political will overseas, recent technological advancements that 
facilitate the production and distribution of counterfeit and pirated 
goods, and powerful economic incentives for both producers and 
consumers, particularly in developing countries. Further, as the U.S. 
government focuses increasingly on enforcement, it will face different 
and complex factors, such as organized crime, that may prove quite 
difficult to address.

Matter for Congressional Consideration: 

Because the authorizing legislation for the National Intellectual 
Property Law Enforcement Coordination Council (NIPLECC) does not 
clearly define the council's mission, NIPLECC has struggled to 
establish its purpose and unique role. If the Congress wishes to 
maintain NIPLECC and take action to increase its effectiveness, the 
Congress may wish to consider reviewing the council's authority, 
operating structure, membership, and mission. Such consideration could 
help the NIPLECC identify appropriate activities and operate more 
effectively to coordinate intellectual property law enforcement issues.

Agency Comments: 

We received technical comments from USTR, the Departments of State, 
Justice, and Homeland Security, the Copyright Office, and USITC. We 
incorporated these comments into the report as appropriate. We also 
received formal comment letters from the Department of Commerce (which 
includes comments from USPTO), the Department of Homeland Security, and 
USAID. USAID raised concerns regarding our findings on the agency's 
contribution to an online IPR training database. No agency disagreed 
with our overall findings and conclusions, though all suggested several 
wording changes and/or additions to improve the report's completeness 
and accuracy. The FBI provided no comments on the draft report.

As arranged with your offices, unless you publicly announce the 
contents earlier, we plan no further distribution of this report until 
30 days after the date of this letter. At that time, we will send 
copies of this report to other interested committees. We will also 
provide copies to the Secretaries of State, Commerce, and Homeland 
Security; the Attorney General; the U.S. Trade Representative; the 
Director of the Federal Bureau of Investigation; the Director of the 
U.S. Patent and Trademark Office; the Register of Copyrights; the 
Administrator of the U.S. Agency for International Development; and the 
Chairman of the U.S. International Trade Commission. We will make 
copies available to other interested parties upon request.

If you or your staff have any questions regarding this report, please 
call me at (202) 512-4128. Other GAO contacts and staff acknowledgments 
are listed in appendix XI.

Loren Yager: 
Director, International Affairs and Trade: 

[End of section]

Appendixes: 

Appendix I: Objectives, Scope, and Methodology: 

The Chairmen of the House Committees on Government Reform, 
International Relations, and Small Business requested that we review 
U.S. government efforts to improve intellectual property protection 
overseas. This report addresses (1) the specific efforts that U.S. 
agencies have undertaken; (2) the impact, and industry views, of these 
actions; (3) the means used to coordinate these efforts; and (4) the 
challenges that these efforts face in generating their intended impact.

To describe agencies' efforts, as well as the impact of these efforts, 
we analyzed key U.S. government intellectual property reports, such as 
the annual "Special 301" reports for the years 1994 through 2004, and 
reviewed information available from databases such as the State 
Department's intellectual property training database and the Department 
of Homeland Security's online database of counterfeit goods seizures. 
To assess the reliability of the online Department of Homeland Security 
seizure data [Hyperlink, 
http://www.cbp.gov/xp/cgov/import/commercial_enforcement/ipr/seizure/], 
we interviewed the officials responsible for collecting the data and 
performed reliability checks on the data. Although we found that the 
agency had implemented a number of checks and controls to ensure the 
data's reliability, we also noted some limitations in the precision of 
the estimates. However, we determined that the data were sufficiently 
reliable to provide a broad indication of the major products seized and 
the main country from which the seized imports originated. Our review 
of the reliability of the State Department's training database is 
described below as part of our work to review agency coordination. 
While we requested a comprehensive listing of countries assessed and 
GSP benefits removed due to IPR problems, USTR was unable to provide 
us with such data because this information is not regularly collected.

We met with officials from the Departments of State, Commerce, Justice, 
and Homeland Security; the Office of the U.S. Trade Representative 
(USTR); the U.S. Patent and Trademark Office (USPTO); the Copyright 
Office; the Federal Bureau of Investigation (FBI); the U.S. 
International Trade Commission (USITC); and the U.S. Agency for 
International Development (USAID). We also met with officials from the 
following industry groups that address intellectual property issues: 
the International Intellectual Property Alliance, the International 
AntiCounterfeiting Coalition, the Motion Picture Association of 
America, the Recording Industry Association of America, the 
Entertainment Software Association, the Association of American 
Publishers, the Software and Information Industry Association, the 
International Trademark Association, the Pharmaceutical Research and 
Manufacturers of America, and the National Association of 
Manufacturers. We reviewed reports and testimonies that such groups had 
prepared. In addition, we attended a private sector intellectual 
property rights enforcement conference and a U.S. government training 
session sponsored by USPTO and the World International Property 
Organization (WIPO). We met with officials from the World Trade 
Organization (WTO) and WIPO in Geneva, Switzerland, to discuss their 
interactions with U.S. agency officials.

We reviewed literature modeling trade damages due to intellectual 
property violations and, in particular, examined the models used to 
estimate such losses in Ukraine, which has been subject to U.S. trade 
sanctions since 2002. We met with officials to discuss the 
methodologies and processes employed in the Ukraine sanction case. To 
identify the impact of trade sanctions against Ukraine, we studied the 
U.S. overall imports from Ukraine as well as imports of commodities on 
the sanction list from Ukraine from 2000 to 2003.

Finally, to verify information provided to us by industry and agency 
officials and obtain detailed examples of U.S. government actions 
overseas and the results of those actions, we traveled to four 
countries where serious IPR problems have been identified--Brazil, 
China, Russia, and Ukraine--and where the U.S. government has taken 
measures to address these problems. We met with U.S. embassy and 
foreign government officials and with U.S. companies and industry 
groups operating in those countries. To choose the case study 
countries, we evaluated countries according to a number of criteria 
that we established, including the extent of U.S. government 
involvement; the economic significance of the country and seriousness 
of the intellectual property problem; the coverage of key intellectual 
property areas (patent, copyright, and trademark) and industries (e.g., 
optical media, pharmaceuticals); and agency and industry association 
recommendations. We collected and reviewed U.S. government and industry 
documents in these countries.

To describe and assess the coordination mechanisms for U.S. efforts to 
address intellectual property rights (IPR) overseas, we identified 
formal coordination efforts (mandated by law, created by executive 
decision, or occurring and documented on a regular basis) and reviewed 
documents describing agency participation, mission, and activities. We 
interviewed officials from agencies participating in the Special 301 
subcommittee of the Trade Policy Staff Committee, the National 
Intellectual Property Law Enforcement Coordination Council, the IPR 
Training Coordination Group, and the IPR Center. While USTR did provide 
GAO with a list of agencies that participated in Special 301 
subcommittee meetings during the 2004 review, USTR officials requested 
that we not cite this information in our report on the grounds that 
this information is sensitive. USTR asked that we instead list all the 
agencies that are invited to participate in the TPSC process, though 
agency officials acknowledged that, based upon their own priorities, 
not all agencies actually participate. We also met with officials from 
intellectual property industry groups who participate in the IPR 
Training Coordination Group and who are familiar with the other agency 
coordination efforts. We attended a meeting of the IPR Training 
Coordination Group to witness its operations, and we visited the IPR 
Center. To further examine the coordination of agency training efforts, 
we conducted a data reliability assessment of the IPR Training Database 
[Hyperlink, http://www.training.ipr.gov] to determine whether it 
contained an accurate and complete record of past and planned training 
events. To assess the completeness and reliability of the training data 
in the database, we spoke with officials at the Department of State 
about the management of the database and with officials at the agencies 
about the entering of the data in the database. We also conducted 
basic tests of the data's reliability, including checking to see 
whether agencies input information related to training events in the 
database and information appeared accurate. We assessed the 
reliability of these data to determine how useful they are to the 
agencies that provide IPR training, not because we wanted to include 
them in this report. As noted on pages 34 and 35, we determined that 
these data had some problems of timeliness and completeness, which 
limited their usefulness. Finally, we compared the data with documents 
containing similar information, provided by some of the agencies, to 
check the data's consistency. To identify other forms of coordination, 
we spoke with U.S. agency officials about informal coordination and 
communication apart from the formal coordination bodies cited above.

To identify the challenges that agencies' activities face in generating 
their intended impact, we spoke with private sector and embassy 
personnel in the case study countries about political and economic 
circumstances relevant to intellectual property protection and the 
impact of these circumstances on U.S. activities. We also spoke with 
law enforcement personnel at the Departments of Justice and Homeland 
Security, the FBI, and foreign law enforcement agencies in Washington, 
D.C., and our case study countries about the challenges they face in 
combating intellectual property crime overseas. We visited markets in 
our case study countries where counterfeit and pirated merchandise is 
sold to compare local prices for legitimate and counterfeit products 
and to confirm (at times with industry experts present) that 
counterfeit goods are widely and easily available. We reviewed embassy 
cables, agency and industry reports, and congressional testimony 
provided by agency, industry, and overseas law enforcement officials 
documenting obstacles to progress in IPR protection around the world. 
We reviewed studies and gathered information at our interviews on the 
arguments for and against IPR protection in developing countries.

In addition to the general discussion, we chose the optical media 
sector to illustrate the challenges facing antipiracy efforts. To 
identify the challenges, we interviewed industry representatives from 
the optical media sector both in the United States and overseas 
regarding their experiences in fighting piracy. We reviewed Special 301 
reports and industry submissions to study the optical media piracy 
levels over the years. In Brazil, Russia, and Ukraine, we recorded the 
prices of legal and illegal music CDs, movies, and software at local 
markets.

We used U.S. overall imports and import of the products on the sanction 
list from Ukraine. The source of the overall import data is the U.S. 
Bureau of the Census, and the source of the import data of the products 
on the sanction list is the Trade Policy Information System (TPIS), a 
Web site operated by the Department of Commerce. In order to assess the 
reliability of the overall import data, we (1) reviewed "U.S. 
Merchandise Trade Statistics: A Quality Profile" by the Bureau of the 
Census and (2) discussed the data with the Chief Statistician at GAO. 
We determined the data to be sufficiently reliable for our purpose, 
which was to track the changes in U.S. overall imports from Ukraine 
from 2000 through 2003. In order to assess the reliability of the data 
from TPIS, we did internal checks on the data and checked the data 
against a Bureau of the Census publication. We determined the data to 
be sufficiently reliable for our purpose, which was to track changes in 
U.S. imports from Ukraine of the goods on the sanction list.

We conducted our work in Washington, D.C; Geneva, Switzerland; 
Brasilia, Rio de Janeiro, and Sao Paolo, Brazil; Beijing, China; 
Moscow, Russia; and Kiev, Ukraine, from June 2003 through July 2004, in 
accordance with generally accepted government auditing standards.

[End of section]

Appendix II: Trade Agreements Negotiated Since 1990 That Address IPR, 
and the WTO Membership Status for Countries Involved: 

Trade agreements[A]: IPR agreements/understandings: Bahamas Letter of 
Understanding on the Copyright Act and Regulations; 
Year: 2000; 
WTO status: IPR agreements/understandings: N.

Trade agreements[A]: IPR agreements/understandings: Bulgaria IPR 
Agreement; 
Year: 1994; 
WTO status: 1996.

Trade agreements[A]: IPR agreements/understandings: Croatia IPR MOU; 
Year: 1998; 
WTO status: 2000.

Trade agreements[A]: IPR agreements/understandings: Ecuador IPR 
Agreement; 
Year: 1993; 
WTO status: 1996.

Trade agreements[A]: IPR agreements/understandings: Hungary IPR 
Agreement; 
Year: 1993; 
WTO status: 1995.

Trade agreements[A]: IPR agreements/understandings: India IPR 
Agreement; 
Year: 1993; 
WTO status: 1995.

Trade agreements[A]: IPR agreements/understandings: Jamaica IPR 
Agreement; 
Year: 1994; 
WTO status: 1995.

Trade agreements[A]: IPR agreements/understandings: Japan Mutual 
Understanding on IPR; 
Year: IPR agreements/understandings: 1994; 
WTO status: 1995.

Trade agreements[A]: IPR agreements/understandings: Japan Mutual 
Understanding on IPR; 
Year: IPR agreements/understandings: 1994; 
WTO status: 1995.

Trade agreements[A]: IPR agreements/understandings: Korea Exchange of 
Letters on Pipeline Protection; Year: 1990; 
WTO status: 1995.

Trade agreements[A]: IPR agreements/understandings: Korea Exchange of 
Letters on Data Protection; 
Year: 2002; 
WTO status: 1995.

Trade agreements[A]: IPR agreements/understandings: Nicaragua IPR 
Agreement; 
Year: 1997; 
WTO status: 1995.

Trade agreements[A]: IPR agreements/understandings: Paraguay IPR MOU; 
Year: 1998; 
WTO status: 1995.

Trade agreements[A]: IPR agreements/understandings: PRC MOU on IP 
Protection; 
Year: 1992; 
WTO status: 2001.

Trade agreements[A]: IPR agreements/understandings: PRC Agreement on 
IP Protection; 
Year: IPR agreements/understandings: 1995; 
WTO status: 2001.

Trade agreements[A]: IPR agreements/understandings: PRC Report on 
Measures to Enforce IP Protection; 
Year: 1996; 
WTO status: 2001.

Trade agreements[A]: IPR agreements/understandings: Peru IPR MOU; 
Year: 1997; 
WTO status: 1995.

Trade agreements[A]: IPR agreements/understandings: Philippines 
Protection and Enforcement of IPR; Year: 1993; 
WTO status: 1995.

Trade agreements[A]: IPR agreements/understandings: Sri Lanka IPR 
Agreement; 
Year: 1991; 
WTO status: 1995.

Trade agreements[A]: IPR agreements/understandings: Taiwan - Agreement 
on IP Protection; 
Year: IPR agreements/understandings: 1992; 
WTO status: 2002.

Trade agreements[A]: IPR agreements/understandings: Taiwan - Agreement 
on IP Protection (Trademark); Year: 1993; 
WTO status: 2002.

Trade agreements[A]: IPR agreements/understandings: Taiwan - Agreement 
on IP Protection (Copyright); Year: 1993; 
WTO status: 2002.

Trade agreements[A]: IPR agreements/understandings: Thailand IPR 
Agreement; 
Year: 1991; 
WTO status: 1995.

Trade agreements[A]: IPR agreements/understandings: Trinidad and 
Tobago IPR Agreement; 
Year: IPR agreements/understandings: 1994; 
WTO status: 1995.

Trade agreements[A]: IPR agreements/understandings: Vietnam 
Establishment of Copyright Relations Agreement; 
Year: 1997; 
WTO status: IPR agreements/understandings: N.

Trade agreements[A] with IPR provisions: Albania Trade Relations 
Agreement; 
Year: IPR agreements/understandings: 1992; 
WTO status: 2000.

Trade agreements[A] with IPR provisions: Armenia Trade Relations 
Agreement; 
Year: IPR agreements/understandings: 1992; 
WTO status: 2003.

Trade agreements[A] with IPR provisions: Azerbaijan Trade Relations 
Agreement; 
Year: IPR agreements/understandings: 1995; 
WTO status: N.

Trade agreements[A] with IPR provisions: Belarus Trade Relations 
Agreement; 
Year: IPR agreements/understandings: 1993; 
WTO status: N.

Trade agreements[A] with IPR provisions: Bulgaria Agreement on Trade 
Relations; 
Year: IPR agreements/understandings: 1991; 
WTO status: 1996.

Trade agreements[A] with IPR provisions: Cambodia Trade Relations and 
IPR Agreement; 
Year: IPR agreements/understandings: 1996; 
WTO status: N.

Trade agreements[A] with IPR provisions: Czech Republic Trade 
Relations Agreement; 
Year: IPR agreements/understandings: 1990; 
WTO status: 1995.

Trade agreements[A] with IPR provisions: Georgia Trade Relations 
Agreement; 
Year: IPR agreements/understandings: 1993; 
WTO status: 2000.

Trade agreements[A] with IPR provisions: Kazakhstan Trade Relations 
Agreement; 
Year: IPR agreements/understandings: 1993; 
WTO status: N.

Trade agreements[A] with IPR provisions: Kyrgyzstan Trade Relations 
Agreement; 
Year: IPR agreements/understandings: 1992; 
WTO status: 1998.

Trade agreements[A] with IPR provisions: Latvia Trade and IPR 
Agreement; 
Year: IPR agreements/understandings: 1995; 
WTO status: 1999.

Trade agreements[A] with IPR provisions: Moldova Agreement on Trade 
Relations; 
Year: IPR agreements/understandings: 1992; 
WTO status: 2001.

Trade agreements[A] with IPR provisions: Mongolia Trade Relations 
Agreement; 
Year: IPR agreements/understandings: 1991; 
WTO status: 1997.

Trade agreements[A] with IPR provisions: Panama Trade Relations 
Agreement; 
Year: IPR agreements/understandings: 1994; 
WTO status: 1997.

Trade agreements[A] with IPR provisions: Poland Business and Economic 
Treaty; 
Year: IPR agreements/understandings: 1994; 
WTO status: 1995.

Trade agreements[A] with IPR provisions: Romania Agreement on Trade 
Relations; 
Year: IPR agreements/understandings: 1992; 
WTO status: 1995.

Trade agreements[A] with IPR provisions: Russia Trade Relations 
Agreement; 
Year: IPR agreements/understandings: 1992; 
WTO status: N.

Trade agreements[A] with IPR provisions: Slovakia Trade Relations 
Agreement; 
Year: IPR agreements/understandings: 1990; 
WTO status: 1995.

Trade agreements[A] with IPR provisions: Tajikistan Trade Relations 
Agreement; 
Year: IPR agreements/understandings: 1993; 
WTO status: N.

Trade agreements[A] with IPR provisions: Turkmenistan Agreement on 
Trade Relations; 
Year: IPR agreements/understandings: 1993; 
WTO status: N.

Trade agreements[A] with IPR provisions: Ukraine Trade Relations 
Agreement; 
Year: IPR agreements/understandings: 1992; 
WTO status: N.

Trade agreements[A] with IPR provisions: Uzbekistan Trade Relations 
Agreement; 
Year: IPR agreements/understandings: 1994; 
WTO status: N.

Trade agreements[A] with IPR provisions: Vietnam Trade Relations 
Agreement; 
Year: IPR agreements/understandings: 2001; 
WTO status: N.

Trade agreements[A]: Free trade agreements (FTAs): Chile FTA; 
Year: 2003; 
WTO status: 1995.

Trade agreements[A]: Free trade agreements (FTAs): Jordan FTA; 
Year: 2001; 
WTO status: 2000.

Trade agreements[A]: Free trade agreements (FTAs): North American FTA 
(Mexico and Canada); 
Year: IPR agreements/understandings: 1994; 
WTO status: 1995.

Trade agreements[A]: Free trade agreements (FTAs): Singapore FTA; 
Year: 2003; 
WTO status: 1995. 

Legend: 

IPR: intellectual property rights: 

MOU: memorandum of understanding: 

PRC: People's Republic of China: 

N: Not a member of the WTO: 

Source: GAO, based on Department of Commerce and USTR data.

[A] Includes only in-force agreements: 

[End of table]

[End of section]

Appendix III: WTO TRIPS Dispute Settlement Cases Brought by the U.S. 
Government: 

Since the implementation of the WTO Agreement on Trade-Related Aspects 
of Intellectual Property (TRIPS) in 1996, the United States has brought 
a total of 12 TRIPS-related cases against 11 countries and the European 
Community (EC) to the WTO through that organization's dispute 
settlement mechanism (see below). Of these, 8 cases were resolved by 
mutually agreed solutions. In nearly all of these cases, U.S. concerns 
were addressed via changes in laws or regulations by the other party. 
Only 2 (involving Canada and India) have resulted in the issuance of a 
panel report, both of which were favorable rulings for the United 
States.[Footnote 59] Consultations are ongoing in one additional case, 
against Argentina, and this case has been partially settled. One case, 
involving an EC regulation protecting geographical indications, has 
gone beyond consultations and is in WTO dispute settlement panel 
proceedings.

1. Argentina: pharmaceutical patents --Brought by U.S., DS171 and 
DS196 Case originally brought by the United States in May 1999. 
Consultations ongoing, although 8 of 10 originally disputed issues have 
been resolved.

2. Brazil: "local working" of patents and compulsory licensing --
Brought by U.S., DS199 Case originally brought by the United States in 
June 2000. Settled between the parties in July 2001. Brazil agreed to 
hold talks with the United States prior to using the disputed article 
against a U.S. company.

3 .Canada: term of patent protection --Brought by U.S., DS170 Case 
originally brought by the United States in May 1999. Panel report 
issued in May 2000 decided for the United States, (WT/DS170/R) later 
upheld by Appellate Body report. According to USTR, Canada announced 
implementation of a revised patent law on July 24, 2001.

4. Denmark: enforcement, provisional measures, civil proceedings -
-Brought by U.S., DS83 Case originally brought by United States in May 
1997. Settled between the parties in June 2001. In March 2001, Denmark 
passed legislation granting the relevant judicial authorities the 
authority to order provisional measures in the context of civil 
proceedings involving the enforcement of intellectual property rights.

5. EC: trademarks and geographical indications --Brought by U.S., 
DS174 Case originally brought by U.S. in June 1999. WTO panel 
proceedings are ongoing.

6. Greece and EC: motion pictures, TV, enforcement --Brought by 
U.S., DS124 and DS125 Case originally brought by the United States in 
May 1998. Greece passed a law in October 1998 that provided an 
additional enforcement remedy for copyright holders whose rights were 
infringed upon by TV stations in Greece. Based on the implementation of 
this law, the case was settled between the parties in March 2001.

7. India: patents, "mailbox," exclusive marketing --Brought by EC, 
DS79 --Brought by U.S., DS50 Case originally brought by the United 
States in July 1996. Panel report issued in September 1997 decided for 
the United States (WT/DS50/R).

8. Ireland and EC: copyright and neighbouring rights --Brought by 
U.S., DS82 and DS115 Case originally brought by the United States in 
May 1997. Settled between the parties in November 2000. Ireland passed 
a law and amended its copyright law in ways that satisfied U.S. 
concerns.

9. Japan: sound recordings intellectual property protection --
Brought by EC DS42 --Brought by U.S., DS28 Case originally brought 
by the United States in February 1996. Settled between the parties in 
January 1997. Japan passed amendments to its copyright law that 
satisfied U.S. concerns.

10. Pakistan: patents, "mailbox," exclusive marketing --Brought by 
U.S., DS36 Case originally brought by the United States in May 1996. 
Settled between the parties in February 1997. Pakistan issued rulings 
with respect to the filing and recognition of patents that satisfied 
U.S. concerns.

11. Portugal: term of patent protection --Brought by U.S., DS37 
Case originally brought by the United States in May 1996. Settled 
between the parties in October 1996. Portugal issued a law addressing 
terms of patent protection in a way that satisfied U.S. concerns.

12. Sweden: enforcement, provisional measures, civil proceedings -
-Brought by U.S., DS86 Case originally brought by the United States in 
June 1997. Settled between the parties in December 1998. In November 
1998, Sweden passed legislation granting the relevant judicial 
authorities the authority to order provisional measures in the context 
of civil proceedings involving the enforcement of intellectual property 
rights.

[End of section]

Appendix IV: Country Case Study: Brazil: 

The State of IPR in Brazil: 

Brazil is generally credited with having adequate laws to protect 
intellectual property, but the enforcement of these laws remains a 
problem. Officials we interviewed in Brazil identified several reasons 
for the weak enforcement, including insufficient and poorly trained 
police and a judiciary hampered by a lack of resources, inefficiencies 
and, in some cases, corruption. Most broadly, they cited the weak 
economy and lack of formal sector employment as reasons for the 
widespread sale and consumption of counterfeit goods. One Brazilian 
official commented that the current intellectual property protection 
system has generated large price gaps between legitimate and 
illegitimate products, making it very difficult to combat illegitimate 
products. However, private sector officials also pointed to high tax 
rates on certain goods as a reason for counterfeiting. Regardless, the 
sale of counterfeit merchandise abounds. One market in Sao Paulo that 
we visited covered many city blocks and was saturated with counterfeit 
products. For example, we identified counterfeit U.S. products such as 
Nike shoes, Calvin Klein perfume, and DVDs of varying quality. The 
market not only sold counterfeit products to the individual consumer, 
but many vendors also served as "counterfeit wholesalers" who offered 
even cheaper prices for purchasing counterfeit sunglasses in bulk, for 
example. According to industry representatives, this market also has 
ties to organized crime.

Private and public sector officials identified two significant 
challenges to Brazil's improving its intellectual property protection: 
establishing better border protection, particularly from Paraguay--a 
major source of counterfeit goods--and a better-functioning National 
Industrial Property Institute (INPI). The acting president of INPI 
acknowledged that, owing to insufficient personnel, money, and space, 
INPI is not functioning well and has an extremely long backlog of 
patent and trademark applications. Two private sector representatives 
commented that U.S. assistance to INPI could be very valuable. It can 
currently take as long as 9 years to get a patent approved. Patent 
problems have been exacerbated by an ongoing conflict between INPI and 
the Ministry of Health over the authority to grant pharmaceutical 
patents. A pharmaceutical industry association report claims that the 
current system, which requires the Ministry of Health to approve all 
pharmaceutical patents, is in violation of TRIPS.

U.S. Government Actions to Address Brazil's IPR Problems: 

The U.S. government has been involved in various activities to promote 
better enforcement of intellectual property rights in Brazil. Brazil 
has been cited on the Special 301 Priority Watch List since 2002 and is 
currently undergoing a review to determine whether it should remain 
eligible for Generalized System of Preferences (GSP) benefits. In 
recent years, Brazilian officials have participated in training offered 
by USPTO in Washington, D.C., and have studied intellectual property 
issues in depth in the United States as participants in U.S.-sponsored 
programs. The Departments of State, Justice, and Homeland Security have 
also sponsored or participated in training events or seminars on 
different intellectual property issues. The Department of State's 
public affairs division has also worked on public awareness events and 
seminars.

Officials from industry associations representing American companies, 
as well as officials from individual companies we met with, stated that 
they are generally satisfied with U.S. efforts to promote the 
protection of IPR in Brazil. Many had regular contact with embassy 
personnel to discuss intellectual property issues, and several had 
collaborated with U.S. agencies to develop and present seminars or 
training events in Brazil that they believed were useful tools for 
promoting IPR. The private sector officials we spoke with made some 
suggestions for improving U.S.-sponsored assistance, including 
consulting with the private sector earlier to identify appropriate 
candidates for training. However, private and public sector officials 
commented regularly on the usefulness of training activities provided 
by the United States, and many expressed a desire for more of these 
services. In particular, several officials expressed a hope that the 
United States would provide training and technical assistance to INPI. 
In February 2004, a senior Department of Commerce official discussed 
collaboration and technical assistance matters with a Brazilian 
minister, and USPTO staff recently traveled to Brazil to provide 
training at INPI.

Overall, the direct impact of U.S. efforts was difficult to determine, 
but U.S. involvement regarding IPR in Brazil was widely recognized. 
Several industry and Brazilian officials we spoke with were familiar 
with the Special 301 report; many in the private sector had contributed 
to it via different mechanisms. One industry official commented that 
the Special 301 process is helpful in convincing the Brazilian 
authorities of the importance of intellectual property protection. 
Others were less certain about whether the report had any impact. A 
Brazilian minister stated that the United States is the biggest 
proponent of IPR, although he did not believe that any particular U.S. 
program had had a direct impact on Brazilian intellectual property laws 
or enforcement. Others, however, believed that pressure from the U.S. 
government lent more credibility to the private sector's efforts and 
may have contributed to changes in Brazilian intellectual property 
laws.

Changes in Brazil's IPR Protection: 

Most private sector officials we spoke with agreed that the 
government's interest in combating intellectual property crime has 
recently increased. They noted that developments have included the work 
of the Congressional Investigative Commission on Piracy (CPI) in the 
Brazilian Congress and newly formed special police groups to combat 
piracy. In addition, President Lula signed a law last year amending the 
penal code with respect to copyright violations; minimum sentences were 
increased to 2 years and now include a fine and provide for the seizure 
and destruction of counterfeit goods. However, these increased 
sanctions do not apply to software violations. According to an official 
with the Brazilian special police, the Brazilian government was moved 
to prosecute piracy more vigorously because government officials 
realized that the growing informal economy was resulting in the loss of 
tax revenue and jobs. However, a Brazilian state prosecutor and the CPI 
cited corruption and the involvement of organized crime in intellectual 
property violations as challenges to enforcement efforts.

[End of section]

Appendix V: Country Case Study: China: 

The State of IPR in China: 

China's protection of IPR has improved in recent years but remains an 
ongoing concern for the U.S. government and the business community. 
Upon accession to the WTO in December 2001, China was obligated to 
adhere to the terms of the Agreement on Trade-Related Aspects of 
Intellectual Property (TRIPS). According to the U.S. Trade 
Representative's (USTR) 2003 review of China's compliance with its WTO 
commitments, IPR enforcement was ineffective, and IPR infringement 
continued to be a serious problem in China. USTR reported that lack of 
coordination among Chinese government ministries and agencies, local 
protectionism and corruption, high thresholds for criminal prosecution, 
lack of training, and weak punishments hampered enforcement of IPR.

Piracy rates in China continue to be excessively high and affect 
products from a wide range of industries. According to a 2003 report by 
China's State Council's Development Research Center, the market value 
of counterfeit goods in China is between $19 billion and $24 billion. 
Various U.S. copyright holders also reported that estimated U.S. losses 
due to the piracy of copyrighted materials have continued to exceed 
$1.8 billion annually. Pirated products in China include films, music, 
publishing, software, pharmaceuticals, chemicals, information 
technology, consumer goods, electric equipment, automotive parts, and 
industrial products, among many others. According to the International 
Intellectual Property Alliance, a coalition of U.S. trade associations, 
piracy levels for optical discs are at 90 percent and higher, almost 
completely dominating China's local market. Furthermore, a U.S. trade 
association reported that the pharmaceutical industry not only loses 
roughly 10 to 15 percent of annual revenue in China to counterfeit 
products, but counterfeit pharmaceutical products also pose serious 
health risks.

U.S. Government Actions to Address China's IPR Problems: 

Since the first annual Special 301 review in 1989, USTR has initiated 
several Special 301 investigations on China's IPR protection. However, 
since the conclusion of a bilateral IPR agreement with China in 1996, 
China has not been subject to a Special 301 investigation but has 
instead been subject to monitoring under Section 306.[Footnote 60] In 
2004, USTR reviewed China's implementation under Section 306 and 
announced that China would be subject to an out-of-cycle review in 
2005. In addition to addressing China's IPR protection through these 
statutory mechanisms, the U.S. government has been involved in various 
efforts to protect IPR in China. The U.S. government's activities in 
China are part of an interagency effort involving several agencies, 
including USTR, State, Commerce, Justice, Homeland Security, USPTO, and 
the Copyright Office. In 2003, U.S. interagency actions in China to 
protect IPR included (1) engaging the Chinese government at various 
levels on IPR issues; (2) providing training and technical assistance 
for Chinese ministries, agencies, and other government entities on 
various aspects of IPR protection; and (3) providing outreach and 
assistance to U.S. businesses. Most private sector representatives we 
met with in China said that they are generally satisfied with the U.S. 
government's efforts in China but noted areas for potential 
improvement.

In 2003, U.S. government engagement with China on IPR issues ranged 
from high-level consultations with Chinese ministries to letters, 
demarches, and informal meetings between staff-level U.S. officials and 
their counterparts in the Chinese government. U.S. officials noted that 
during various visits to China in 2003, the Secretaries of Commerce and 
Treasury and the U.S. Trade Representative, as well as several 
subcabinet level officials, urged their Chinese counterparts to develop 
greater IPR protection. U.S. officials said that these efforts were 
part of an overall strategy to ensure that IPR protection was receiving 
attention at the highest levels of China's government. U.S. officials 
also noted that the U.S. Ambassador to China has placed significant 
emphasis on IPR protection. In 2002 and 2003, the U.S. government held 
an Ambassador's Roundtable on IPR in China that brought together 
representatives from key U.S. and Chinese agencies, as well as U.S. and 
Chinese private sector representatives. U.S. officials said that China 
Vice Premier Wu's involvement in the 2003 roundtable was an indication 
that IPR was receiving attention at high levels of China's government. 
One U.S. official stated that addressing pervasive systemic problems in 
China, such as lack of IPR protection, is "nearly impossible unless it 
stays on the radar at the highest levels" of the Chinese government.

A second key component of U.S. government efforts to ensure greater 
protection of IPR in China involved providing numerous training 
programs and technical assistance to Chinese ministries and agencies. 
U.S. government outreach and capacity-building efforts included 
sponsoring speakers, seminars, and training on specific technical 
aspects of IPR protection to raise the profile and increase technical 
expertise among Chinese officials. The U.S. government targeted other 
programs to address the lack of criminalization of IPR violations in 
China. For example, an interagency U.S. government team (Justice, DHS, 
and Commerce) conducted a three-city capacity-building seminar in 
October 2003 on criminalization and enforcement. The program was 
cosponsored by the Chinese Procuratorate, the Chinese government's 
prosecutorial arm. U.S. government officials noted that the program was 
unique because the seminar brought together officials from Chinese 
criminal enforcement agencies, including customs officials, criminal 
investigators, and prosecutors, as well as officials from 
administrative enforcement agencies. In March 2004, the Copyright 
Office hosted a week-long program for a delegation of Chinese copyright 
officials that provided technical assistance and training on copyright-
related issues, including the enforcement of copyright laws, as well as 
outreach and relationship-building.

The U.S. government has also provided outreach regarding IPR protection 
to U.S. businesses in China, and Commerce has played a lead role in 
this effort. For example, in late 2002, Commerce established a Trade 
Facilitation Office in Beijing to, among other things, provide 
outreach, advocacy, and assistance to U.S. businesses on market access 
issues, including IPR protection. Additionally, Foreign Commercial 
Service officers in China work with U.S. firms to identify and resolve 
cases of IPR infringement. Commerce officials indicated that increasing 
private sector awareness and involvement in IPR issues are essential to 
furthering IPR protection in China.

GAO's 2004 analysis of selected companies' views on China's 
implementation of its WTO commitments reported that respondents ranked 
IPR protection as one of the three most important areas of China's WTO 
commitments but that most respondents thought China had implemented IPR 
reforms only to some or little extent.[Footnote 61] In general, other 
industry association and individual company representatives whom we 
interviewed in China were satisfied with the range of U.S. government 
efforts to protect IPR in China. Several industry representatives noted 
that they had regular contact with officials from various U.S. agencies 
in China and that the staff assigned to IPR issues were generally 
responsive to their firm's or industry's needs. Private sector 
representatives stated that the U.S. government's capacity-building 
efforts were one of the most effective ways to promote IPR protection 
in China. Some representatives noted that Chinese government entities 
are generally very receptive to these types of training and 
information-sharing programs. However, some private sector 
representatives also said that the U.S. agencies could better target 
the programs to the appropriate Chinese audiences and follow up more to 
ensure that China implements the knowledge and practices disseminated 
through the training programs. Most private sector representatives we 
met with also said that the U.S. government efforts in China were 
generally well coordinated, but they indicated that they were not 
always able to determine which U.S. agency was leading the effort on a 
specific issue.

Changes in China's IPR Protection: 

Although Chinese laws are now, in principle, largely compliant with the 
strict letter of the TRIPS agreement, U.S. government and other 
industry groups note that there are significant gaps in the law and 
enforcement policies that pose serious questions regarding China's 
satisfaction of the TRIPS standards of effective and deterrent 
enforcement. In 2003, USTR found that China's compliance with the TRIPS 
agreement had been largely satisfactory, although some improvements 
still needed to be made. Before its accession to the WTO, China had 
completed amendments to its patent law, trademark law, and copyright 
law, along with regulations for the patent law. Within several months 
after its accession, China issued regulations for the trademark law and 
copyright law. China also issued various sets of implementing rules, 
and it issued regulations and implementing rules covering specific 
subject areas, such as integrated circuits, computer software, and 
pharmaceuticals.

China has taken some steps in administrative, criminal, and civil 
enforcement against IPR violators. According to USTR's review, the 
central government promotes periodic anticounterfeiting and antipiracy 
campaigns as part of its administrative enforcement, and these 
campaigns result in a high number of seizures of infringing materials. 
However, USTR notes that the campaigns are largely ineffective; because 
cases brought by the administrative authorities usually result in 
extremely low fines, criminal enforcement has virtually no deterrent 
effect on infringers. China's authorities have pursued criminal 
prosecutions in a small number of cases, but the Chinese government 
lacks the transparency needed to determine the penalties imposed on 
infringers. Last, China has seen an increased use of civil actions 
being brought for monetary damages or injunctive relief. This suggests 
an increasing sophistication on the part of China's IPR courts, as 
China continues to make efforts to upgrade its judicial system. 
However, U.S. companies complain that the courts do not always enforce 
China's IPR laws and regulations consistently and fairly.

Despite the overall lack of IPR enforcement in China, IPR protection is 
receiving attention at high levels of the Chinese government. Notably, 
in October 2003, the government created an IPR Leading Group, headed by 
a vice premier, to address IPR protection in China. Several U.S. 
government officials and private sector representatives told us that 
high-level involvement by Vice Premier Wu would be critical to the 
success of future developments in IPR protection in China. In April 
2004, the United States pressed IPR issues with China during a formal, 
cabinet-level consultative forum with China called the Joint Commission 
of Commerce and Trade (JCCT). In describing the results of the April 
2004 JCCT meeting, USTR reported that China had agreed to undertake a 
number of near-term actions to address IPR protection. China's action 
plan included increasing penalties for IPR infringement and launching a 
public awareness campaign on IPR protection. Additionally, China and 
the United States agreed to form an IPR working group under the JCCT to 
monitor China's progress in implementing its action plan.

[End of section]

Appendix VI: Country Case Study: Russia: 

The State of IPR in Russia: 

Although the Russian government has demonstrated a growing recognition 
of the seriousness of IPR problems in the country and has taken some 
actions, serious problems persist. Counterfeiting and piracy are common 
(see fig. 4). For example, a Microsoft official told us that 
approximately 80 percent of business software is estimated as pirated 
in Russia, and that the Russian government is a "huge" user of pirated 
software. Further, the pharmaceutical industry estimates that up to 12 
percent of drugs on the market in Russia are counterfeit. Of particular 
note to the U.S. government, piracy of optical media (e.g., CDs, DVDs, 
etc.) in Russia is rampant. According to an official from the Russian 
Anti-Piracy Organization, as much as 95 percent of optical media 
products produced in Russia are pirated. U.S. concern focuses on the 
production of pirated U.S. optical media products by some or all of the 
30 optical media production facilities in Russia, 17 of which are 
located on Russian government-owned former defense sites where it has 
been difficult for inspection officials to gain access (though, 
according to an embassy official, access has recently improved). 
According to a U.S. embassy official, Russian demand for optical media 
products is estimated at 18 million units per year, but Russian 
production is estimated to be 300 million units. U.S. Embassy and 
private sector officials believe that the excess pirated products are 
exported to other countries. Industry estimates losses of over $1 
billion annually as a result of this illegal activity.

Figure 4: Counterfeit and Legitimate Russian Detergent: 

[See PDF for image] 

[End of figure] 

Russia has made many improvements to its IPR legislation, but the U.S. 
government maintains that more changes are needed. For example, the 
2004 Special 301 report states that the Russian government is still 
working to amend its laws on protection of undisclosed information--in 
particular, protection for undisclosed test data submitted to obtain 
marketing approval for pharmaceuticals and agricultural chemicals. 
Further, U.S. industry and Russian officials view Russia's IPR 
enforcement as inadequate and cite this as the largest deterrent to 
effective IPR protection in Russia. For example, the 2004 Special 301 
report emphasizes that border enforcement is considered weak and that 
Russian courts do not have the authority in criminal cases to order 
forfeiture and destruction of machinery and materials used to make 
pirated and counterfeit products. Further, one Russian law enforcement 
official told us that since IPR crimes are not viewed as posing much of 
a social threat, IPR enforcement is "pushed to the background" by 
Russian prosecutors.

U.S. Government Actions to Address Russia's IPR Problems: 

The U.S. government has taken several actions in Washington, D.C., and 
Moscow to address its concerns over Russia's failure to fully protect 
IPR. Russia has been placed on USTR's Special 301 Priority Watch List 
for the past 8 years (1997 through 2004). Further, a review of Russia's 
eligibility under the Generalized System of Preferences (GSP) is 
underway owing to concerns over serious IPR problems in the country.

The U.S. government has actively raised IPR issues with the Russian 
government, including at the highest levels. According to the 
Department of State, at a United States-Russia summit in September 
2003, President Bush raised IPR concerns with Russian President Putin. 
Further, in Moscow, the U.S. Ambassador to Russia considers IPR an 
embassy priority and has sent letters to Russian government officials 
and published articles in the Russian press that outline U.S. 
government concerns.

Many agencies resident in the U.S. Embassy in Moscow are engaged in IPR 
issues. The Department of State's Economic Section is the Embassy 
office with primary responsibility for IPR issues. This office 
collaborates closely with USTR and holds interagency embassy meetings 
to coordinate on IPR efforts. In addition to interagency communication 
through these meetings, each agency is also engaged in separate 
efforts. For example, the Economic Section has met regularly with 
Russian government officials to discuss IPR issues. Justice has held 
two training events on IPR criminal law enforcement in 2004, and has 
two more events planned for this year, while the Embassy's Public 
Affairs Office is involved with IPR enforcement exchange and training 
grants. Further, the Department of Commerce's Foreign Commercial 
Service works with U.S. companies on IPR issues and sponsored a 2003 
seminar on pharmaceutical issues, including IPR-related topics. 
According to a Justice official, U.S. law enforcement agencies are 
making efforts to build relationships with their Russian counterparts.

Industry representatives whom we interviewed in Moscow expressed 
support for U.S. government efforts to improve intellectual property 
protection, particularly the U.S. Ambassador's efforts to increase the 
visibility of IPR problems. An official from one IPR association in 
Moscow noted, with respect to USTR's efforts in Russia, "No other 
country in the world is so protective of its copyright industries." 
Industry representatives noted that the U.S. government has played an 
important role in realizing IPR improvements in Russia, although the 
Russian government is also clearly motivated to strengthen intellectual 
property protections as part of its preparation for joining the World 
Trade Organization. Further, U.S. Embassy staff believe that they have 
been successful in ensuring that IPR is now firmly on the "radar 
screen" of the Russian government.

Changes in Russia's IPR Protection: 

According to U.S. sources, numerous IPR laws have been enacted. For 
example, the Department of State has noted that the Russian government 
has passed new laws on patents, trademarks, industrial designs, and 
integrated circuits and has amended its copyright law. Further, U.S. 
and Russian sources note that Russia has improved its customs and 
criminal codes. Moreover, in 2002, the Russian government established a 
high-level commission, chaired by the prime minister, specifically to 
address intellectual property problems (although, despite a recognized 
desire to address IPR enforcement, the commission has reportedly not 
accomplished a great deal in terms of concrete achievements).

In addition to these promising improvements, there have been some signs 
that enforcement is improving, if slowly. For example, the Russian 
government issued a decree banning the sale of audio and video products 
by Russian street vendors, and the U.S. Embassy has reported that 
subsequently several kiosks known to sell pirated goods were closed. 
Industry associations have reported that law enforcement agencies are 
generally willing to cooperate on joint raids, and in 2003 several 
large seizures were made as a result of such raids. Further, in 
February 2004 the Russian Anti-Piracy Organization reported that police 
raids involving optical media products took place almost daily all over 
Russia and were covered widely on national TV channels. In addition, 
according to the U.S. Embassy, the consumer products industry reports 
progress in reducing the amount of counterfeit consumer goods on the 
Russian market, and one major U.S. producer even claims that it has 
virtually eliminated counterfeiting of all its consumer goods lines. 
Finally, according to a U.S. Embassy official, the first prison 
sentence was handed down during the summer of 2004 for an IPR violator 
who had been manufacturing and distributing pirated DVDs.

U.S. and Russian officials have identified several problems that the 
Russian government faces in implementing effective IPR protection in 
the future. Issues identified include: (1) the price of legitimate 
products is too high for the majority of Russians, who have very modest 
incomes; (2) Russian citizens and government officials are still 
learning about the concept of private IPR--a Russian Ministry of Press 
official pointed out that until the dissolution of the Soviet Union, 
all creations belonged to the state, and the general public and the 
government didn't understand the concept of private IPR; and (3) 
corruption and organized crime make the effective enforcement of IPR 
laws difficult.

[End of section]

Appendix VII: Country Case Study: Ukraine: 

The State of IPR in Ukraine: 

Ukraine has been the subject of intense industry and U.S. government 
concern since 1998 owing primarily to the establishment of pirate 
optical media plants that produced music, video discs, and software for 
the Ukraine market and for export to other countries. This followed the 
crackdown on pirate plants in Bulgaria in 1998 that resulted in many of 
these manufacturers relocating to Ukraine. Regarding Ukraine, USTR 
cites U.S. music industry losses of $210 million in revenues in 1999, 
while the Motion Picture Association reported losses of $40 
million.[Footnote 62] The international recording industry association 
estimated that the production capacity of optical media material was 
around 70 million units per year and the demand within Ukraine for 
legitimate CD was fewer than 1 million units in 2000. Further the audio 
and video consumer market in Ukraine has consisted overwhelmingly of 
pirated media. For example, in 2000, the international recording 
industry association estimated that 95 percent of products on the 
market were pirated. Further, USTR and industry cite significant 
counterfeiting of name brand products, pharmaceuticals, and 
agricultural chemicals.

By 2004, IPR in Ukraine has shown improvement in several areas, 
although the digital media sold in the consumer retail market remain 
predominantly pirated. The production of such digital media in local 
plants has ended however, according to U.S. government and industry 
officials in Kiev. Further, U.S. officials noted Ukraine's accession to 
key WIPO conventions and improvements in intellectual property law that 
represents progress in fulfilling TRIPS requirements as part of 
Ukraine's WTO accession process.

Remaining areas of concern regarding U.S. IPR are inadequacies in the 
existing optical media licensing law and the fact that Ukraine remains 
a key transit country for pirated products. Other areas of concern are 
the prevalence of pirated digital media products in the consumer retail 
markets, lack of law enforcement actions, and the use of illegal 
software by government agencies (although this situation has also 
improved). U.S. industry and government now seek certain amendments to 
intellectual property laws and better enforcement efforts, including 
border controls to prevent counterfeit and pirated products from 
entering the Ukrainian domestic retail market.

U.S. Government Actions to Address Ukraine's IPR problems: 

The U.S. government has undertaken concerted action in Washington and 
Kiev to address its concerns regarding the state of intellectual 
property protection in Ukraine. With the emergence of serious music and 
audio-visual piracy, Ukraine was placed on USTR's Special 301 Watch 
list in 1998. Ukraine was elevated to USTR's Special 301 Priority Watch 
list for 2 years, in 1999 and 2000. In June 2000, during President 
Clinton's state visit to Kiev, he and President Kuchma endorsed a U.S.-
Ukrainian joint action plan to combat optical media piracy. However, 
slow and insufficient response by Ukraine led to its designation as a 
Priority Foreign Country in 2001 and to the imposition of punitive 
economic sanctions (100 percent duties) against Ukrainian exports to 
the United States valued at $75 million in 2002. The Priority Foreign 
Country designation remains in place. The sanctions affect a number of 
Ukrainian exports, including metal products, footwear, and chemicals. 
In addition, a U.S. government review of Ukraine's eligibility for 
preferential tariffs under the GSP program was undertaken, and 
Ukraine's benefits under this program were suspended in August 2001. 
GSP benefits have not been reinstated.

In Kiev, intellectual property issues remain a priority for the U.S. 
Embassy, including the U.S. Ambassador. A State Department economic 
officer has been assigned responsibility as the focal point for such 
issues and has been supported in this role by the actions of other U.S. 
agencies. The Commercial Law Center, funded by USAID, and the 
Commercial Law Development Program of the U.S. Department of Commerce 
have provided technical advice to Ukraine as it crafted intellectual 
property laws.[Footnote 63] A U.S. private sector association reported 
that it had worked closely with USAID on projects related to commercial 
law development. Ukrainian legislative officials reported that training 
opportunities and technical assistance provided by the United States 
had facilitated the creation of IP legislation. Training is also 
focused on enforcement, including training of a Ukrainian judicial 
official by USPTO in Washington, D.C., during 2003. The State 
Department has trained police and plans further police training in 
Ukraine during 2004. Further, Department of Commerce officials maintain 
contact with U.S. firms and collect information on intellectual 
property issues for State and USTR.

Changes in Ukraine's IPR Protection: 

Ukraine has made improvements in its legal regime for IPR protection. 
According to Ukrainian officials, Ukraine passed a new criminal code 
with criminal liability for IPR violations, as well as a new copyright 
law. Ukrainian officials report that the laws are now TRIPS compliant. 
U.S. government documents show that Ukraine implemented an optical disk 
law in 2002, although it was deemed "unsatisfactory," and sanctions 
remain in place based on Ukraine's failure to enact and enforce 
adequate optical disk media licensing legislation.

In addition, Ukraine has pursued enforcement measures to combat 
counterfeiting, although enforcement overall is still considered weak. 
USTR reported that administrative and legal pressure by the Ukrainian 
government led to the closure of all but one of the major pirate CD 
plants. Some pirate plants moved to neighboring countries. According to 
U.S. and private sector officials in Kiev, remaining optical plants 
have switched to legitimate production. However, pirated optical media 
are still prevalent in Ukraine, imported from Russia and elsewhere, 
with little effort to remove them from the market. In a visit to the 
Petrovska Market in Kiev, we found a well-organized series of buildings 
where vendors sold movies, music, software, and computer games from 
open-air stands. The price for a pirated music CD was $1.50, compared 
to legitimate CDs that were sold for almost $20 in a music store 
located near the market.

According to USTR, Ukraine is a major trans-shipment point and storage 
location for illegal optical media produced in Russia and elsewhere. A 
Ukrainian law enforcement official reported that the number of IPR 
crimes detected has risen from 115 in 2001 to 374 in 2003. He noted 
that to date, judges have been reluctant to impose jail time, but had 
used fines that are small compared to the economic damages. A U.S. 
government official also reported that the fines are too small to be an 
effective deterrent.

While one U.S. company told us about the lack of Ukrainian government 
actions regarding specific IPR enforcement issues, a large U.S. 
consumers goods company told us that consumer protection officials and 
tax police had worked with it to reduce counterfeit levels of one 
product line from approximately 40 percent in 1999 to close to zero 
percent 16 months later. The company provided 11 laboratory vans as 
well as personnel that could accompany police to open markets and run 
on-the-spot tests of products.

[End of section]

Appendix VIII: Comments from the Department of Commerce: 

THE SECRETARY OF COMMERCE: 
Washington. D. C. 20230:

August 20, 2004:
Mr. Loren Yager: 
Director: 
International Affairs and Trade: 
U.S. General Accounting Office: 
441 G Street, N.W.: 
Washington, D.C. 20548:

Dear Mr. Yager:

The Department of Commerce appreciates the opportunity to review the 
draft report entitled "Intellectual Property: U.S. Efforts Have 
Contributed to Strengthened Laws Overseas, but Challenges Remain." We 
found the report very comprehensive and our comments are provided as an 
enclosure.

Sincerely, 

Signed by: 

Donald L. Evans:

Enclosure:

U.S. Department of Commerce Comments Regarding Draft Report (GAO-04-
912) "Intellectual Property U.S. Efforts Have Contributed to 
Strengthened Laws Overseas."

We found the report to contain a good summary of the activities 
undertaken by a number of U.S. Government agencies to strengthen 
intellectual property rights (IPR) laws in certain countries that are 
perceived as not adequately protecting intellectual property. Since 
much of the information in the report is anecdotal, it is difficult to 
conclude how much our government's activities have impacted IPR 
protection in those countries. Nevertheless, we believe that your 
report documents that progress is being made. Further progress will be 
likely when countries recognize the value of their own intellectual 
property and of the commercialization of their own technologies.

General Comments:

We would advise that the terms "counterfeiting" and "piracy" be used in 
their more technical sense. GAO uses the term "counterfeiting" to refer 
to all types of infringements or IPR violations, even when discussing 
optical media (e.g., see page 4, "the growing problem of counterfeiting 
of optical media"). It would be more technically precise when 
discussing violations of intellectual property rights, to use the term 
"counterfeiting" in connection with commercial scale trademark-related 
infringements of a good or product, and "piracy" only when discussing 
the commercial-scale infringement of copyright-protected works. It 
would be more technically accurate to use the terms "trademark 
counterfeiting" and "copyright piracy."

The report states that U.S. Government IPR activities can be grouped in 
three categories: policy initiatives; training and assistance 
activities, and law enforcement. While "advocacy" can be included in 
the category of "training and assistance," we believe that advocacy 
deserves separate mention. In our meetings with GAO staff, we provided 
a number of real life success stories resulting from DOC overseas staff 
working to champion specific IPR issues. DOC/ITA's Foreign Commercial 
Service provides services directly to constituents, which result in 
tangible benefits for American firms and brands.

This report underestimates the scope of IPR protection and enforcement 
work carried out as a part of our regular interactions with trading 
partners. While FTAs and BTAs are mentioned and are certainly important 
and high profile, a significant component of U.S. Government work also 
involves discussions under Trade and Investment Framework Agreements 
and Bilateral Investment Treaties, as well as other bilateral and 
regional trade mechanisms, such as APEC-IPEG activities.

The Department's International Trade Administration (ITA) participated 
in at least two meetings with the GAO staff; still, ITA's role is not 
recognized in the draft report. 

The following are GAO's comments on the Department of Commerce's letter 
dated August 20, 2004.

GAO's Comments: 

1. We have reviewed the report to ensure that the term "counterfeiting" 
is used to refer to commercial-scale trademark-related infringements of 
a good or product and the term "piracy" is used to refer to commercial-
scale infringements of copyright-protected works.

2. While we do not discuss "advocacy" separately in this report, this 
type of effort has been addressed in the policy initiatives section of 
the report, specifically in the discussion entitled "U.S. Officials 
Undertake Diplomatic Efforts to Protect Intellectual Property" (see p. 
18). We note that U.S. government officials overseas, including 
officials from the Department of Commerce, work with U.S. companies and 
foreign governments to address specific IPR problems. We have also 
included a particular example involving Department of Commerce efforts 
to resolve problematic issues related to proposed Mexican legislation 
that involved the pharmaceutical industry. We have also added another 
reference to advocacy efforts on page 27.

3. We chose to emphasize IPR-specific agreements, bilateral trade 
agreements, and free trade agreements in our report (discussion 
entitled "U.S. Government Engages in IPR-Related Trade Negotiations") 
because USTR officials consistently cited these agreements as central 
components of their IPR efforts. However, we do note the negotiation of 
trade and investment framework agreements in footnote 24 of the report.

4. The efforts of the Department of Commerce's International Trade 
Administration (ITA) are cited in our report. The report does not 
specifically list the ITA, as we intentionally kept the discussion for 
all government entities at the "departmental" level (with a few 
exceptions for entities that have distinct responsibilities, such as 
the FBI and USPTO) without mentioning the numerous bureaus and offices 
involved for each department. This approach was adopted to keep the 
report as clear as possible for the reader. While the report does not 
specifically attribute Commerce's IPR efforts to ITA, several examples 
of Commerce's efforts that are listed in the report are, in fact, ITA 
activities. For example, in addition to the activities cited in point 2 
above, Commerce (meaning ITA) is also mentioned as a participant in 
annual GSP and Special 301 reviews (see pp. 12 and 32), and as a 
participant in IPR efforts in the report's China, Russia, and Ukraine 
appendixes. Further, we have specified that Commerce (meaning ITA), 
along with USTR, is the administrator for the private sector trade 
advisory committee system (p. 15).

[End of section]

Appendix IX: Comments from the Department of Homeland Security: 

U.S. Department of Homeland Security: 
Washington, DC 20528:

Homeland Security:

August 24, 2004:

Loren Yager:

Director, International Affairs and Trade: 
U.S. Government Accountability Office: 
441 G St., NW:
Washington, DC 20548:

Dear MS. Yager:

RE: GAO-04-912, Intellectual Property: U S. Efforts Have Contributed to 
Strengthened Laws Overseas, but Challenges Remain (GAO Job Code 
320199):

Thank you for the opportunity to review your draft report. The 
Department of Homeland Security (DHS) appreciates the work done in this 
draft report to identify approaches to Safeguard intellectual property 
rights overseas. We are providing general comments for your use in 
preparing the final report. Additionally, this assumes that GAO will 
incorporate DHS's technical comments that were provided under separate 
cover and discussed by telephone.

We propose that the final report reflect Customs and Border 
Protection's (CBP) work with the World Customs Organization (WCO) 
garding Intellectual Property Rights (IPR) protection. CBP participates 
in the WCO+ IPR Strategic Group as a member of the group's Executive 
Committee, which is responsible for steering the group's activities. 
The WCO IPR Strategic Group was developed as a joint venture with 
international business sponsors to help member customs administrations 
to improve the efficiency and effectiveness of their IPR border 
enforcement programs.

The WCO IPR Strategic Group provides an overview of the global 
counterfeiting phenomenon from the customs administrations' 
perspectives and a full range of Services for the exclusive benefit of 
its members and sponsors including collection of intelligence and data 
regarding IPR violations globally. The group meets quarterly to 
coordinate its activities, to discuss current issues in IPR border 
enforcement, and to advise member customs administrations regarding 
implementation of border measures under Trade-Related Aspects of 
Intellectual Property Rights (TRIPs). In addition, the WCO IPR 
Technical Assistance Group Sponsors and cu ucts technical assistance, 
including training, fellowship programs, practical exercises and IPR 
management consultant services to WCO member administrations.

Most importantly, through the WCO, DHS's CBP has led the effort in 
drafting WCO model IPR legislation and strategic plans geared towards 
global IPR protection and otherwise helping foreign countries develop 
the tools necessary for effective border enforcement programs.

CBP also contributes to efforts aimed at strengthening international 
IPR protection through its work with the APEC Sub-Committee on Customs 
Procedures and the World Intellectual Property Organization (WIPO). In 
addition, CBP routinely provides IPR training to foreign governments on 
a bilateral basis through programs sponsored by the Departments of 
Commerce and State. Through its International Visitors Program CBP 
routinely consults with foreign government officials and academics 
regarding border enforcement of IPR.	In addition, CBP frequently meets 
with industry and trade associations interested in protection of IPR.	
IPR Center feedback from industry recipients of outreach presentations, 
that included a variety of IPR manufacturing industries, has been both 
positive and productive. Additionally, there has been a significant 
increase in requests for the IPR Center to provide additional outreach 
presentations.

Although the draft recognizes that DHS participates in bilateral and 
multi-lateral discussions and negotiations regarding IPR enforcement, 
it ignores the fact that DHS's CBP is the expert on border enforcement 
of IPR as regards foreign governments as well as other U.S. Government 
agencies. The importance of border enforcement cannot be overstated as 
it offers the most efficient means of identifying and disposing of 
infringing articles. CBP routinely provides experts on border measures 
for training programs sponsored by various U.S. and international 
agencies and organizations.

Sincerely,

Signed by: 

Anna Dixon: 
Director, 
Departmental Liaison: 

The following are GAO's comments on the Department of Homeland 
Security's letter dated August 24, 2004.

GAO's Comments: 

1. We have added a paragraph citing the Department of Homeland 
Security's work with the World Customs Organization (see p. 17).

2. We added language on p. 22 of the report that notes that a key 
component of DHS authority is a "border nexus."

[End of section]

Appendix X: Comments from the U.S. Agency for International 
Development: 

USAID:

U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT:

August 19, 2004:

Loren Yager: 
Director: 
International Affairs and Trade:
U.S. General Accounting Office:
441 G Street, N.W.: 
Washington, DC 20548:

Dear Mr. Yager:

I am pleased to provide the U.S. Agency for International Development's 
(USAID) formal response on the draft GAO report entitled INTELLECTUAL 
PROPERTY-U.S. Efforts Have Contributed to Strengthened Laws Overseas, 
but Challenges Remain (September 2004).

We have reviewed the draft report and appreciate the time and effort of 
your team. There are, however, several points raised in the report 
concerning USAID's involvement in promoting the enforcement of 
intellectual property rights on which we have provided comments in the 
enclosed document.

Thank you for the opportunity to respond to the GAO draft report and 
for the courtesies extended by your staff in the conduct of this 
review.

Sincerely,

Steven Wisecarver:
Deputy Assistant Administrator: 
Bureau for Management:

Enclosure: a/s:

USAID Comments on GAO Draft Report Entitled: INTELLECTUAL PROPERTY - 
U.S. Efforts Have Contributed to Strengthened Laws Overseas but 
Challenges Remain (September 2004):

There are several points raised in the report concerning USAID's 
involvement in promoting the enforcement of intellectual property 
rights on which we would like to elaborate further.

First is the report's assertion that USAID is one of several U.S. 
Government agencies "primarily responsible for U.S. Government 
activities to protect and enforce U.S. intellectual property rights 
overseas." While many IPR technical assistance activities that are 
funded through USAID have the effect of protecting and enforcing U.S. 
intellectual property rights, this is not a primary responsibility of 
our agency. USAID is a development agency, and the IPR training and 
technical assistance we provide is done to help partner countries 
comply with existing international agreements that serve to promote 
economic growth.

For example, USAID has helped numerous countries harmonize their 
foreign trade regimes in order to enable them to both join the World 
Trade Organization (WTO) and to comply with WTO obligations. In order 
to accomplish this, many of our WTO accession assistance projects have 
included training and support for counterpart countries to comply with 
the Agreement on Trade-Related Aspects of Intellectual Property Rights 
(the TRIPs agreement). This training and support, it should be noted, 
is primarily directed at promoting economic growth through improved IPR 
regimes in the countries we work in. As mentioned above, this may also 
have the benefit of helping American owners to enforce their IPR in 
such countries.

Second, the report raises concerns regarding the frequency of USAID's 
contributions to the voluntary IPR Training database, which is managed 
by the U.S. Department of State. To ensure that our projects are 
calibrated to local needs, USAID field units (such as country missions 
and field offices) program and manage the bulk of our trade capacity 
building projects in the field. Consequently, the USAID staff attending 
IPR Training Coordination Group meetings in Washington generally does 
not have decision-making authority regarding the commitment of funds 
spent on IPR technical assistance activities. Their role is to liaise 
and facilitate communication between members of the Group and USAID 
funding units.

Third, the GAO report appears to dismiss the fact that USAID provides 
significant and comprehensive information on all USG-sponsored IPR 
technical assistance activities on an annual basis. USAID conducts a 
Trade Capacity Building (TCB) survey once per year, typically 
completing this massive information gathering exercise by August 31. 
The USAID TCB survey is sent to all U.S. government agencies and 
departments active in trade capacity building activities abroad, 
including the Departments of State, Justice, and Commerce, the US 
Patent and Trademark Office (USPTO), and USAID field units. Data 
collected from USAID's TCB Survey is analyzed to avoid double counting 
and then formatted for uploading onto the USAID TCB database.

The problem of double-counting should not be lightly dismissed. For 
example, much of USAID's funding for IPR activities is actually passed 
to other USG agencies and departments through interagency agreements 
and other funding vehicles. These agencies may then channel USAID-
sourced funds to yet other agencies. For example, the Commercial Law 
Development Program of the U.S. Department of Commerce is a large 
recipient of USAID funds; CLDP in turn frequently channels such funds 
to USPTO to conduct assistance activities on its behalf.

The TCB database may be accessed by all USG agencies, and it is located 
at the following web link: http://qesdb.cdie.org/tcb/index.html. Once 
this data is collected, IPR training activities are culled and 
submitted for inclusion in the IPR Training database managed by the 
State Department. (The creators of the IPR Training database consulted 
with USAID's managers of the TCB database in order to make the 
information between the two databases more easily transferable.)

While USAID only collects this data once a year, the data is rich, 
comprehensive, and timely. The USAID TCB survey gathers information on 
funding levels that each USG respondent is obligating for IPR training 
activities for the current fiscal year.

Thus, the ongoing survey for August 2004 is gathering data for FY 2004 
USG obligations related to IPR and other activities. Since most 
activities that are funded in FY 2004 will actually be implemented 
during FY 2005, the survey results are timely and distinctly relevant 
for members of the IPR Training Coordination Group in projecting 
planned spending on IPR on a country and agency basis.

Finally, should members of the IPR Training Coordination Group desire 
specific and even more up-to-the moment information about the status of 
IPR training activities in specific countries, USAID liaisons can work 
to obtain this information.  

The following are GAO's comments on the U.S. Agency for International 
Development's letter dated August 19, 2004.

GAO's Comments: 

1. We agree with USAID's point that IPR protection and enforcement are 
not the primary responsibility of the agency. USAID and the other 9 
U.S. government entities mentioned in the report have broader missions. 
Rather, we state that USAID and the other U.S. government entities 
undertake the primary U.S. government activities to improve the 
protection and enforcement of U.S. intellectual property overseas.

2. As we noted in the report, the decentralized structure of USAID, 
whereby individual country missions plan and implement training, makes 
it difficult for Washington-based officials to contribute timely 
information to the public training database or to inform the Training 
Coordination Group about USAID's training efforts. Further, several 
members of the Training Coordination Group are frustrated with the 
extent of USAID's information sharing.

3. As we note in the report, USAID submits information annually 
following the conclusion of its own data-gathering exercise. However, 
this data-gathering exercise, which contributes to the USAID trade 
capacity building database, does not provide information needed by the 
Training Coordination Group, such as dates of training or contact 
information, that would improve coordination.

[End of section]

Appendix XI: GAO Contacts and Staff Acknowledgments: 

GAO Contacts: 

Emil Friberg, (202) 512-8990 Leslie Holen, (415) 904-2277: 

Acknowledgments: 

In addition to those named above, Sharla Draemel, Ming Chen, Martin de 
Alteriis, Matt Helm, Ernie Jackson, Victoria Lin, and Reid Lowe made 
key contributions to this report.

(320199): 


FOOTNOTES

[1] The United States exports intellectual property in both goods and 
services. In 2002, the United States earned more than $44 billion in 
royalties and license fees overseas, higher than any other country in 
the world. Royalties and license fees in this case are from the 
authorized overseas use of intangible, nonproduced, nonfinancial assets 
and proprietary rights (such as patents, copyrights, and trademarks), 
and the use of produced originals or prototypes (such as manuscripts 
and cinematographic works).

[2] NIPLECC was mandated under Section 653 of the Treasury and General 
Government Appropriations Act, 2000, Public Law 106-58 (15 U.S.C. 
section 1128).

[3] A copyright provides protection for literary and artistic works 
such as books, musical compositions, and cinematographic works 
(movies). A copyright is a property right in an original work of 
authorship that arises automatically upon creation of such a work and 
belongs, in the first instance, to the author. A patent protects an 
invention by giving the inventor the right to exclude others from 
making, using, or selling a new, useful, nonobvious invention during a 
specific term. Trademarks are words, phrases, logos, or other graphic 
symbols used by manufacturers or merchants to identify their goods and 
distinguish them from others. Other types of intellectual property 
include trade secrets, industrial designs, and geographical 
indications. Geographical indications are names used to identify 
products with quality, reputation or other characteristics attributable 
to the origin of the product. According to a USTR official, examples of 
geographical indications are cognac, Idaho potatoes, Roquefort, and 
bourbon. USTR officials noted that while some countries have separate 
geographical indication protection systems, the United States protects 
geographical indications through its trademark system.

[4] There are various loss estimates due to counterfeiting and piracy. 
For example, the International Intellectual Property Association 
estimated that losses due to piracy of U.S. copyrighted materials 
around the world have reached $20 to $22 billion annually (not 
including Internet piracy). According to the 2003 Department of 
Homeland Security statistics on seizures, the majority of goods seized 
at U.S. ports of entry were counterfeit goods, worth more than $90 
million. USTR reported in its 2003 Special 301 report that losses to 
U.S. companies due to piracy and counterfeiting amounted to $200 to 
$250 billion, although we could not find the original source of this 
number (the closest figure we could identify came from the 
Counterfeiting Intelligence Bureau of the International Chamber of 
Commerce, which estimated worldwide losses in 1995 due to 
counterfeiting at $250 billion, 5 percent of the world's merchandise 
trade). Industry representatives we spoke with acknowledged the 
difficulties in accurately estimating the losses, but pointed out that 
the enormity of the problems is hard to dispute.

[5] For example, the Department of Homeland Security received an 
allegation concerning the smuggling of counterfeit vodka into the 
United States. Recognizing potential health and safety concerns, the 
department immediately investigated the case and subsequently seized 
counterfeit vodka in Florida and Massachusetts.

[6] Although the FBI is part of the Department of Justice and the USPTO 
is part of the Department of Commerce, their roles will be discussed 
separately because of their distinct responsibilities.

[7] For purposes of presentation, we are classifying USTR's actions and 
activities as U.S. "policy efforts" rather than as law enforcement 
actions. We recognize, and USTR officials emphasized to us, that 
certain efforts, such as conducting Special 301 reviews, ensuring 
compliance with trade agreements, and taking IPR cases to the WTO for 
dispute settlement, can be classified as enforcement actions. However, 
for our presentation, we have placed government activities that can 
lead to U.S. court or administrative hearings, and that can involve 
criminal activity, together as law enforcement actions, and we have 
grouped the more discretionary activities of USTR and other agencies 
together as "policy efforts."

[8] As amended by the 1988 Omnibus Trade And Competitiveness Act (P.L. 
100-418).

[9] PFCs are those countries that (1) have the most onerous and 
egregious acts, policies, and practices with 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.

[10] Countries are put on the Priority Watch List for not providing an 
adequate level of intellectual property protection or enforcement, or 
market access for persons relying on intellectual property protection. 
Watch List countries have intellectual property problems that merit 
bilateral attention.

[11] Intellectual property reviews can be part of an annual or "out-of-
cycle" Special 301 review, with the latter initiated by USTR in 
instances where the need to investigate a country's IPR practices falls 
outside the regular, annual review cycle. China, Paraguay, and Ukraine 
were designated as PFCs at times that fell outside the regular Special 
301 process.

[12] Ukraine was cited as failing to comply with the "U.S.-Ukraine 
Joint Action Plan to Combat Optical Media Piracy in Ukraine" agreed to 
by the presidents of both countries in 2000. Although the Ukrainian 
government implemented an optical media disc licensing law in early 
2002, U.S. government and industry officials viewed the law as 
inadequate. 

[13] USTR estimated the loss to the U.S. current account (the current 
account has three separate components): (1) net export of goods and 
services, (2) investment income from assets abroad, and (3) net 
unilateral transfers) due to piracy in music CDs and software in 
Ukraine and held two public hearings on the choice of tariff lines 
subject to 100 percent ad valorem duties to minimize the damage to 
domestic producers and consumers. The affected products fall into 10 
general categories: mineral fuels and oils; inorganic chemicals; 
fertilizer; tanning or dyeing extracts; paper and paperboard; footwear; 
pearls and semiprecious stones; copper; aluminum; nuclear reactors and 
boilers. 

[14] 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.

[15] While we requested a comprehensive listing of countries assessed 
and GSP benefits removed due to IPR problems, USTR was unable to 
provide us with such data because this information in not regularly 
collected.

[16] According to USTR, 134 countries and nonindependent locations are 
GSP beneficiaries. A review is currently underway to determine whether 
to designate Iraq as a GSP beneficiary country.

[17] This listing includes only negotiated agreements that have entered 
into force.

[18] These areas include copyrights, patents, trademarks, trade 
secrets, layout designs of integrated circuits, industrial designs, and 
geographical indications. For more information, see GAO, The General 
Agreement on Tariffs and Trade: Uruguay Round Final Act Should Produce 
Overall U.S. Economic Gains, GAO/GGD-94-83b (Washington, D.C.: July 
1994).

[19] TRIPS provides that countries must ensure that enforcement 
procedures are in place that permit effective actions against any act 
of infringement of IPR covered by TRIPS, including expeditious remedies 
to prevent infringements and remedies which constitute a deterrent to 
further infringement.

[20] Two of the countries with which the United States has specific IPR 
agreements or understandings are not members of the WTO (Bahamas and 
Vietnam). Nine of the countries with which the United States has 
negotiated broader bilateral agreements that include intellectual 
property provisions since 1990 are not members of the WTO, (Azerbaijan, 
Belarus, Cambodia, Russia, Tajikistan, Turkmenistan, Ukraine, 
Uzbekistan, Vietnam) though most are seeking to accede.

[21] Participants in the Central America Free Trade Agreement (CAFTA) 
are the United States, Costa Rica, El Salvador, Guatemala, Honduras, 
Nicaragua, and the Dominican Republic.

[22] Of these seven FTAs, only Chile, Jordan and Singapore have entered 
into force; negotiations have been completed for Australia, Bahrain, 
CAFTA and Morocco, but these agreements have not yet entered into 
force. Prior to 2000, two other FTAs had entered into force: the U.S.-
Israel FTA (entered into force in 1985) and the North American Free 
Trade Agreement between the United States, Canada, and Mexico (entered 
into force in 1994).

[23] Congress established the private sector advisory committee system 
on trade in Section 135 of the Trade Act of 1974 (19 U.S.C. section 
2155). This system is administered by USTR and the Department of 
Commerce. The IPR committee, comprising representatives of law firms, 
associations, and companies, is 1 of 16 Industry Trade Advisory 
Committees that provide their industry-specific perspectives to the 
U.S. government.

[24] The U.S. government also works to strengthen the protection and 
enforcement of intellectual property in trade and investment framework 
agreement negotiations with several countries in regions such as the 
Middle East and Asia.

[25] In 2003, WTO members reached an agreement that waived a TRIPS 
article and thereby allows countries that produce generic 
pharmaceutical products (via a process called "compulsory licensing") 
to export them to countries that are unable to produce necessary 
pharmaceutical items. These exports are allowed to address certain 
circumstances, including grave public health problems resulting from 
HIV/AIDS, tuberculosis, and malaria.

[26] These reviews are referred to as the "Trade Policy Review 
Mechanism."

[27] The WIPO Copyright Treaty brings copyright law in line with the 
digital age and entered into force on March 6, 2002. The WIPO 
Performances and Phonograms Treaty safeguards the interests of 
producers of phonograms or sound recordings as well as those of 
performers whose performances are fixed in phonograms; it entered into 
force on May 20, 2002. These treaties help raise the minimum standards 
of intellectual property protection around the world, particularly with 
respect to Internet-based delivery of copyrighted works.

[28] A State Department official in Geneva noted that one of State's 
key efforts in WIPO has been to urge WIPO to reduce PCT fees (the 
equivalent of "user fees" for those parties filing for international 
patents, most of whom are American) to better reflect the costs of 
administering the patent cooperation system, rather than use the fees 
to subsidize the general operations of the organization. This official 
noted that during the establishment of WIPO's 2004-2005 budget, State 
worked with WIPO staff and member country representatives to avoid a 
proposed increase in PCT fees and was even able to achieve a decrease 
in fees. 

[29] According to the Department of State, Public Diplomacy and 
Cultural Exchange offices work to create a more hospitable environment 
for IPR in foreign countries by, among other activities, hosting 
educational programs, publishing materials, and working with local 
press to get coverage of IPR issues.

[30] For example, according to a Department of Commerce official, in 
2003, U.S. Embassy staff in Mexico worked with industry to raise issues 
related to proposed legislation that provided for overly broad 
compulsory licensing of pharmaceutical products and did not provide 
appropriate royalty compensation. According to this official, several 
months after this joint effort began, the Mexican Congress passed an 
acceptable bill.

[31] The Department of Commerce's Office of the Inspector General 
issued a report in 2000 that discussed USPTO's international training 
efforts, Patent and Trademark Office: Efforts to Protect U.S. 
Intellectual Property Rights Overseas Should Be Strengthened, Final 
Audit Report No. BTD-11747 (Washington, D.C.: August 2000).

[32] Because so many agencies and offices within agencies initiate 
training and technical assistance activities that may be relevant to 
IPR, it is difficult to fully account for all of them.

[33] For example, USDA sponsors programs supporting the development of 
biotechnology overseas that can include an IPR component.

[34] The Computer Crime and Intellectual Property Section (CCIPS) 
addresses intellectual property issues (copyright, trademark, and trade 
secrets) within the Department of Justice's Criminal Division. In April 
2004, CCIPS appointed an International Coordinator for Intellectual 
Property--an action that, in addition to bolstering international 
prosecutorial efforts, is intended to improve coordination between 
policy and law enforcement agencies. CCIPS works to determine how it 
can provide assistance to improve law enforcement in priority 
countries. Aside from investigations and prosecutions, CCIPS efforts 
include training and diplomatic efforts to build cooperative relations 
between U.S. and foreign law enforcement officials.

[35] These foreign countries were Belgium, Denmark, France, Germany, 
Hungary, Israel, the Netherlands, Singapore, Sweden, and Great Britain 
and Northern Ireland. According to a Justice official, law enforcement 
officials in Spain subsequently took action against related targets in 
that country. For more information on this and other investigations, 
see GAO, File Sharing: Selected Universities Report Taking Action to 
Reduce Copyright Infringement, GAO-04-503 (Washington, D.C.: May 28, 
2004).

[36] In another notable instance, referred to as "Operation Buccaneer," 
CCIPS and DHS worked with local law enforcement from five countries 
(the United Kingdom, Australia, Norway, Sweden, and Finland) to 
simultaneously execute more than 65 searches worldwide in December 2001 
in connection with IPR crimes. As a result of these efforts, 4 people 
were convicted in the United Kingdom, 4 were convicted in Finland, and 
27 were convicted in the United States. For this case, Justice 
attorneys and DHS agents traveled to the United Kingdom during the past 
3 years to support prosecution efforts. In what would be the first 
extradition for online copyright piracy, the Department of Justice is 
seeking extradition of an Australian to the United States for 
prosecution in this case. DHS also noted that Operation Buccaneer led 
to a spin-off investigation in April 2003, initiated by DHS, known as 
Operation TENS/Safehaven.

[37] According to a Department of State document, there are over 50 
MLATs in force.

[38] According to a DHS official, the following factors account for the 
enormous increase in counterfeit cigarettes seizures over the past few 
years: (1) profit margin; (2) increased availability and knowledge of 
where to obtain counterfeit cigarettes (especially from China); (3) 
manufacture and packaging that makes the counterfeit cigarettes look as 
though they were produced in the United States; and (4) easier 
marketing and sale of the counterfeit products to unsuspecting 
consumers.

[39] One additional area of note regarding counterfeit seizures 
involves pharmaceutical products. DHS, in cooperation with the 
Department of Health and Human Services' Food and Drug Administration, 
conducts "blitz" exams in an effort to target, identify, and stop 
counterfeit and potentially unsafe prescription drugs from entering the 
United States from foreign countries via mail and common carriers. Such 
efforts have been undertaken over the past year in locations such as 
Florida, New York, and California and have identified, in some 
instances, drugs that appeared to be counterfeit. For more information 
on federal efforts regarding prescription drugs imports, see GAO, 
Prescription Drugs: Preliminary Observations on Efforts to Enforce the 
Prohibitions on Personal Importation, GAO-04-839T (Washington, D.C.: 
July 22, 2004).

[40] Section 337 of the Tariff Act of 1930 as amended (19 U.S.C. 
section 1337).

[41] Argentina, Brazil, Canada, Denmark, Greece, Ireland, India, Japan, 
Pakistan, Portugal, and Sweden.

[42] India-U.S. Patent Protection of Pharmaceutical Products, WT/DS 50/
R (Jan. 16, 1998), as modified by WT/DS 50/AB/R; Canada-Term of Patent 
Protection, WT/DS 170/R (Oct. 12, 2000), upheld at WT/DS 170/AB/R.

[43] Conversely, several IPR cases against the United States have been 
brought to the WTO.

[44] A DHS official noted that in some instances, companies are 
successful in pursuing investigative and enforcement actions on their 
own with foreign officials. We found evidence of such successful 
cooperation in Ukraine, where Procter & Gamble (P&G) worked jointly 
with local officials to conduct product tests at local markets, 
resulting in a decrease in counterfeiting of P&G products. According to 
a P&G official in the Ukraine, within 3 years the extent of estimated 
counterfeit products in the market place went from 40 percent for 
shampoos and 20 percent for detergents down to essentially no 
counterfeit products.

[45] The Trade Expansion Act of 1962.

[46] According to a USTR official, the final decision has been elevated 
to the Cabinet level on more than one occasion when particularly 
sensitive issues were involved; past reviews involving China, India, 
and Brazil were addressed at the Cabinet level.

[47] Twenty-one executive branch government bodies are invited to 
participate in this interagency process: the Council of Economic 
Advisors; the Council on Environmental Quality; the Departments of 
Agriculture, Commerce, Defense, Energy, Health and Human Services, 
Homeland Security, Interior, Justice, Labor, State, Transportation, and 
Treasury; the Environmental Protection Agency; the Agency for 
International Development; the National Economic Council; the National 
Security Council; the Office of Management and Budget; USTR (Chair); 
and the International Trade Commission (non-voting member). The 
Copyright Office is also consulted during the annual Special 301 
interagency review.

[48] According to a State Department official, the Bureau of 
International Narcotics and Law Enforcement at the Department of State 
is planning to spend $2.5 million on intellectual property law 
enforcement training this fiscal year, a substantial increase from the 
estimated $250,000 spent on intellectual property and cybercrime 
training in 2003. The State Department has been working with other 
bureaus and agencies to collect training proposals and review where and 
how the new funding should be spent.

[49] The database can be viewed at http://www.training.ipr.gov.

[50] National Intellectual Property Law Enforcement Coordination 
Council Report, 2001-2002.

[51] National Intellectual Property Law Enforcement Coordination 
Council Report, 2003.

[52] The IPR Center arose from the work of the National Security 
Council's Special Coordination Group on Intellectual Property Rights 
and Trade-Related Crime. This group was formed in order to implement 
Presidential Decision Directive 42 concerning international crime. In 
1999, a consensus of the group members resulted in a multi-agency plan 
to improve the U.S. government's efforts in IPR enforcement, and the 
IPR Center was created.

[53] An official from the National Association of Manufacturers, an 
industry group whose membership consists primarily of small or medium-
sized companies, told us that member companies do not use the IPR 
Center because they are unaware of this resource. An official from 
another industry group stated that the center has not been particularly 
useful to date.

[54] The DHS seizure data are available at http://www.cbp.gov/xp/cgov/
import/commercial_enforcement/ipr/seizure/.

[55] Regarding the level of specificity provided when raising seizure 
figures with foreign governments, a USTR official stated that it is not 
typical to address the details of a case. USTR has not raised specific 
seizure cases or asked a foreign government to take action against 
specific violators. Whether the details necessary to provide such 
information are available depends on the information that was collected 
by DHS at the time of the seizure. USTR will defer to DHS to provide 
the appropriate level of information when discussing seizures with 
foreign governments. A DHS official noted that the Trade Secrets Act 
(18 USC section 1905) precludes sharing information about specific 
imports, even where there is criminal activity. The Trade Secrets Act 
makes it a criminal offense for an employee of the United States, or 
one of its agencies, to disclose trade secrets and certain other forms 
of confidential commercial and financial information except where such 
disclosure is "authorized by law."

[56] In July 2003, the House Committee on International Relations held 
a hearing entitled "Intellectual Property Crimes: Are Proceeds From 
Counterfeited Goods Funding Terrorism?" The Secretary General of 
Interpol testified at this hearing.

[57] According to one music industry official, this effort is targeted 
throughout the entire former Soviet Union except for the Baltic states.

[58] "Whack-a-mole" refers to an amusement park game where a "mole" is 
hit with a mallet into a hole on the board only to immediately 
resurface from another hole. Industry and government officials 
regularly use this analogy to describe the phenomenon of IPR problems 
migrating from a country that takes actions to fight such problems to 
another country that is less vigilant.

[59] India-U.S. Patent Protection of Pharmaceutical Products, WT/DS 50/
R (Jan. 16, 1998), as modified by WT/DS 50/AB/R; Canada-Term of Patent 
Protection, WT/DS 170/R (Oct. 12, 2000), upheld at WT/DS 170/AB/R.

[60] Section 306 (19 U.S.C. section 2416), requires that USTR monitor 
the implementation of each measure undertaken, or agreement that is 
entered into, by a foreign country under the Special 301 review.

[61] GAO, World Trade Organization: U.S. Companies' Views on China's 
Implementation of Its Commitments, GAO-04-508 (Washington, D.C.: Mar. 
24, 2004).

[62] The U.S. government placed prohibitive tariffs on $75 million 
worth of Ukraine exports in 2002 after it estimated the loss 
independently.

[63] Representatives of the Ukrainian legislature told us that there 
had been a problem coordinating U.S. government legal advice to the 
Ukraine. The legislature had to reconcile differences in the legal 
approach of the two U.S.-funded entities in a second reading of 
amendments to IPR legislation.

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