# Special 301 Report/2014/Section 2

SECTION II. COUNTRY REPORTS
Determination in Section 301 Investigation of Ukraine
Ukraine was designated a Priority Foreign Country in the 2013 Special Report due to the particular IPR acts, policies, and practices identified in the 2013 Special 301 Report. (See 2013 Special 301 Report; Identification of Ukraine as a Priority Foreign Country and Initiation of Section 301 Investigation, 78 FR 33886 (June 5, 2013)). Those acts, policies, and practices involved: (1) the administration of Ukraine's system for collecting societies, which are responsible for collecting and distributing copyright royalties to U.S. and other rights holders; (2) use of infringing software by Ukrainian government agencies; and (3) online infringement of copyright and related rights. On May 30, 2013, the United States Trade Representative initiated a Section 301 investigation of the acts, policies, and practices identified in the Special 301 Report.
Based on the information obtained during the investigation, on February 28, 2014, the U.S. Trade Representative determined that these acts, policies, and practices are unreasonable and burden or restrict United States commerce, but, due to the current political situation in Ukraine, no action would be taken at that time. (See Notice of Determination in Section 301 Investigation of Ukraine, 79 FR 14326 (March 13, 2014)).
USTR remains committed to addressing the problems that served as the basis for the designation of Ukraine as a PFC, and appreciates Ukraine's recent outreach and ongoing engagement in exploring how to ameliorate these problems and improve its overall IP regime. The United States looks forward to working with Ukraine on these three issues.
PRIORITY WATCH LIST
China
China remains on the Priority Watch List and subject to Section 306 monitoring.
China's leadership has acknowledged the critical role that intellectual property plays in spurring innovation and the need to improve China's protection and enforcement of IP rights, including at the Third Plenum of the 18th Central Committee of the Chinese Communist Party. Consistent with China's policy objectives, its judicial, legislative, administrative, and enforcement authorities are in the midst of wide-ranging legal reform efforts relating to the protection and enforcement of IPR in China. Certain rights holders report positive experiences, including in some cases a greater ability to obtain redress against infringers in civil court actions. The United States also notes increased cooperation between U.S. and Chinese law enforcement agencies in an effort to stem cross-border flows of infringing products. The United States looks forward to strengthened cooperation, building on the increasing and positive cooperation between U.S. customs and investigative agencies and their Chinese counterparts, including the General Administration of Customs and Ministry of Public Security.
At the same time, a wide range of U.S. stakeholders in China continues to report serious obstacles to effective protection of IPR in all forms, including patents, copyrights, trademarks, ​trade secrets as well as protection against unfair commercial use or unauthorized disclosure of test and other data generated to obtain marketing approval for pharmaceutical products. As a result, sales of IPR-intensive goods and services in China remain disproportionately low when compared to sales in similar, or even less developed, markets that provide a stronger environment for IPR protection and market access. Despite laudable policy objectives and a welcome ongoing reform effort, foreign rights holders in China continue to face a complex and challenging IPR environment. Given the size of China's consumer marketplace and its global importance as a producer of a broad range of products, China's protection and enforcement of IPR will continue to be a focus of U.S. trade policy.
In particular, the theft of trade secrets remains a significant concern. Such thefts are occurring not only inside but also outside China for the competitive advantage of Chinese state-owned and private companies. Conditions are likely to deteriorate as long as those committing such thefts, and those benefitting, continue to operate with relative impunity, often taking advantage of the theft in order to enter into unfair competition or disadvantageous business relationships with their victims. The United States strongly urges the Chinese government to take serious steps to put an end to these activities and to deter further activity by rigorously investigating and prosecuting trade secret thefts conducted by both cyber and conventional means.
Of longstanding concern are Chinese central, provincial, and local government measures and actions that appear to require or pressure rights holders to transfer IPR from foreign to domestic entities. Sometimes guided by government measures or policy statements intended to promote indigenous innovation and the development of strategic industries, government authorities may deny or delay market access or otherwise condition government procurement, permissions, subsidies, tax treatment, and other actions on IPR being owned or developed in China, or licensed to a Chinese entity. The U.S. Government is also concerned by the increased number of stakeholders reporting that Chinese government entities are using regulatory pressure to compel the licensing of important technologies or to dissuade stakeholders from pursuing available legal avenues to enforce their IPR. China has made certain commitments to the United States on some of these matters; the United States will continue pressing China to follow through on those commitments.
Legal Reform
The United States welcomes China's ongoing legal reform efforts despite serious reservations regarding certain measures. Since 2012, China has undertaken revisions to and invited comment on draft revisions to its existing laws on patents, copyrights, trademarks, drug administration, and scientific and technological achievements. Effective January 1, 2013, China's amended Civil Procedure Law includes provisions that may help U.S. rights holders to secure preliminary measures and otherwise enforce their rights in civil court actions. Currently before China's State Council Legislative Affairs Office (SCLAO) are draft amendments to the Copyright Law and Patent Law. In mid-2014, a revised Trademark Law and implementing regulations will go into effect. Amendment of the Anti-Unfair Competition Law (AUCL), unrevised since first entering into force in 1993, is proceeding at a slower pace. While applauding China's consideration of U.S. government and private sector perspectives and experiences as it amends its laws, the United States notes the need to move forward expeditiously with remaining revisions to its IP-related laws, and underscores the urgent need to update and amend the AUCL and related trade ​secret laws, regulations, and judicial interpretations, including provisions regarding the protection and enforcement of trade secrets.
China also invited comment on draft rules and guidelines on proposed regulations for the remuneration of "service inventions" (i.e., inventions created by an employee as part of his or her employment), rules for anti-monopoly enforcement in the field of intellectual property rights, and patent examination guidelines for utility model and design patents. Several proposed measures raise serious concerns, while others represent a marked improvement over prior drafts. The United States applauds China's openness to receiving comments and looks forward to continuing engagement as future drafts are developed and evaluated, and as the drafts move through the SCLAO and the National People's Congress.
Additional legal reforms require action, including amending the Criminal Law and other relevant measures to address continuing deficiencies in China's criminal IPR enforcement.
National Leading Group
Following the completion of China's 2010-11 Special IPR Campaign, the State Council established a permanent office of the national leading group on combating IPR infringement (Leading Group) to better coordinate and improve China's efforts to combat IPR infringement and the manufacture and sale of counterfeit and sub-standard goods. In 2013, the Leading Group continued to coordinate enforcement actions and undertake special campaigns, including concerning online markets and cross-border infringement cases. The United States encourages China to continue to work with foreign governments and rights holders to share information and demonstrate the constructive role the Leading Group can play to improve the protection and enforcement of IPR.
Trade Secrets
As noted above, trade secret theft is a serious and growing problem in China. Thefts may arise in a variety of circumstances, including those involving departing employees, failed joint ventures, and cyber intrusion and hacking. In addition, thefts arising from the misuse of information submitted to government entities for purposes of complying with regulatory obligations are particularly troubling. The misappropriation of trade secrets and their use by a competing enterprise can have a devastating impact on a company's business, making recourse to adequate and effective legal remedies particularly important.
Under Chinese law, however, available remedies are difficult to obtain, given that civil, administrative, and criminal enforcement against trade secrets theft remains severely constrained. Enforcement obstacles include various deficiencies in China's AUCL; constraints on gathering evidence for use in litigation; difficulties in meeting the criteria for establishing that information constitutes a trade secret; and criminal penalties that do not provide adequate deterrents. Unlike other Chinese IP laws, the AUCL does not expressly authorize judges to issue certain provisional orders that are often critical to the successful pursuit of a civil enforcement action. While China's new Civil Procedure Law may address, or partially address, that problem, there has been insufficient time to ascertain whether this new law is facilitating access to civil remedies in practice. Additionally, the AUCL appears to apply primarily to "commercial undertakings" and not to impose liability on individual actors; the AUCL also requires that a trade secret have "practical applicability," which may limit the scope of protection for early stage research.
​There are other important weaknesses in China's civil enforcement system that relate to mechanisms for gathering evidence; procedures for obtaining preliminary injunctions; and the relative weight afforded certain kinds of evidence, as reflected in the overreliance on original documentary evidence over oral testimony. Without changes to address these weaknesses, some of which are not specific to intellectual property but relate to China's civil process generally, effective enforcement against misappropriation of trade secrets in China will remain challenging.
The United States is encouraged by China's December 2013 Joint Commission on Commerce and Trade (JCCT) commitment to undertake an Action Program that will include concrete actions to address enforcement, enhance public awareness, and require strict legal compliance with respect to trade secrets. The United States will continue to engage with China as it develops this Action Program, and as it advances legal and regulatory reforms to better protect trade secrets.
Copyright and Piracy
Software legalization
The United States will continue to urge that all levels of the Chinese government, as well as state-owned enterprises (SOEs), use only legitimate, licensed copies of software. In May 2011, China's government reported that software legalization in central government offices was complete. At the provincial level, China's government reported that a similar effort was completed as of June 30, 2012. In January, 2014, the Chinese government reported that all local government agencies at the city and county level had completed software legalization by the end of 2013. However, even with the significant work to legalize this number and range of government agencies, U.S. software companies have seen only a modest increase in sales to government agencies, and specific information about the procedures and tools used to ascertain budget or audit information remains unavailable.
Software legalization efforts more recently have extended to China's SOE sector. Losses by software companies due to piracy at SOEs and other enterprises remain very high. To the degree that Chinese firms do not pay for the software that runs many of their operations, they reap a cost advantage relative to competitors who pay for legally acquired software. The United States remains committed to working with China to continue to address these challenges.
Online piracy
Despite bilateral commitments to increase IPR enforcement, online piracy in China persists on a large scale. As of 2013, China had the largest Internet user base in the world, estimated at over 600 million users, including nearly 500 million mobile web users. Despite national campaigns and the leadership of the Leading Group, widespread piracy affects industries involved in the distribution of legitimate music, motion pictures, books and journals, video games, and software. For example, industry reports that in 2013 the revenues from digital music sales in China were $65.4 million, compared to $108.3 million in South Korea, and $32.0 million in Thailand – a country with less than five percent of China's population and a roughly equivalent per capita GDP. Similarly, over 90 percent of the revenue generated by U.S. films in China comes in the form of box office revenues, compared to 25-30 percent in the United States. This difference is partly due to widespread piracy of motion pictures over the Internet and on optical discs. Online piracy extends to scientific, technical, and medical publications as well.
​Parties in China are also facilitating online infringement, in China and third countries, through media box piracy. Manufactured in China and exported abroad, media boxes can be preloaded with infringing content and plugged directly into televisions. They enable the user to stream and download infringing online audio and visual content. The vast majority of the infringing websites to which media box users connect are reportedly located in China. The United States urges China to continue efforts to improve IPR protection and enforcement in this area.
Counterfeit Goods
Despite increased enforcement efforts, problems with counterfeiting in China remain widespread. A partial list of commonly counterfeited goods includes food and beverages; apparel, footwear, and accessories; consumer electronics, computers and networking equipment; entertainment and business software; batteries; chemicals; appliances; pharmaceuticals; and auto parts. Impacts are not limited to lost sales volumes and damage to the reputation of the trademark owner. For example, higher defect and failure rates among counterfeit semiconductors may cause malfunctions in the equipment in which they are incorporated, which may include medical devices, vehicle safety and braking systems, and other critical applications. As one measure of the scale of the problem, products from China (including Hong Kong) accounted for 93 percent of the value of the IPR infringing products seized by U.S. Customs and Border Protection in fiscal year 2013.
Although rights holders report increased enforcement activities, mostly but not exclusively on behalf of local brands, enforcement efforts have yet to slow the sale of counterfeit products online. This is particularly concerning in light of the rapid growth of e-commerce both within China and between China and overseas markets. Rights holders report that local Administrations for Industry and Commerce (AICs) typically confine their efforts to physical markets. While both the State Administration for Industry and Commerce and local AICs have called on online trading websites to improve procedures to address online sales of counterfeit merchandise, these measures have not significantly deterred repeat and large-scale offenders who, after postings are removed, quickly place new postings offering the same infringing goods. It is reported that the Supreme People's Court may issue a judicial interpretation to address these concerns.
IPR and Technology Transfer Requirements
The United States is concerned about Chinese measures, policies and practices at the national, provincial, and local levels that allegedly are intended to hasten China's development into an innovative economy, but that may disadvantage foreign rights holders. Industry reports that many of China's innovation-related policies and other industrial policies, such as strategic emerging industry policies, may have a negative impact on U.S. exports or U.S. investors and their investments or IP rights. Such Chinese measures frequently call for technology transfer and, in certain cases, appear to include criteria that could require IP rights to be developed in China, or to be owned by or licensed to a Chinese party. Such government-imposed conditions or incentives may distort licensing and other private business arrangements, resulting in commercial outcomes that are not optimal for the firms involved or for promoting innovation. Such government intervention in the commercial decisions that enterprises make regarding the ownership, development, registration, or licensing of IP is not consistent with international practice, and may raise concerns relative to China's implementation of its WTO commitments. ​Sustained U.S.-China engagement through the JCCT, the U.S.-China Strategic and Economic Dialogue (S&ED), and high-level government engagement has resulted in important Chinese commitments, including "that technology transfer and technological cooperation shall be decided by businesses independently and will not be used by the Chinese government as a pre-condition for market access," and that China will "treat and protect intellectual property rights (IPR) owned or developed in other countries the same as domestically owned or developed IPR." In addition, at the 2012 JCCT, China "reaffirmed that technology transfer and technology cooperation are the autonomous decisions of enterprises" and pledged further that "[i]f departmental or local documents contain language inconsistent with the above commitment, China will correct them in a timely manner." At the 2013 JCCT, China committed not to implement rules or finalize a draft catalogue containing indigenous innovation criteria for the procurement of vehicles for official use that are inconsistent with China's 2012 JCCT commitment. The United States looks forward to China's full implementation of its commitments, and the revision of other measures, including elements of the High and New Technology Enterprise tax incentive, including requirements that beneficiaries license core IP exclusively to a party in China and make 60 percent of their global research and development expenditures in China.
Patent-Related and Other Policies
IPR and technological standards
The growing importance of IPR and technological standards in China heightens U.S. concerns with a range of Chinese government policies and practices. Whereas open, voluntary, and consensus-based standards best promote economic development, efficiency and innovation, standards development bodies in China often employ opaque and exclusionary practices to the detriment of U.S. and other foreign parties. China's standards setting bodies reportedly often deny membership or participation rights to foreign parties, effectively shutting them out of the process. In some cases, such bodies may condition a firm's ability to participate on it acting through a joint venture in which it can only have a minority ownership stake, the licensing of a firm's IP on concessional terms, or a firm's transfer of technology. Based on a limited number of investigations conducted to date, there is also growing concern that Chinese competition authorities may target for investigation foreign firms that hold IPR that may be essential to the implementation of certain technological standards. Industry reports of intimidating and non-transparent investigative conduct contribute to these concerns. In the related realm of national standards, the Standardization Administration of China (SAC) and the State Intellectual Property Organization (SIPO) published Regulatory Measures on National Standards Involving Patents (Interim) that went into effect on January 1, 2014. The final version of the provisional measures addressed a number of U.S. government and industry concerns with earlier drafts. However, uncertainty remains as to how the measures apply to patent holders who are not participants in the particular standards development process to which the measures apply. In particular, with respect to patents relevant to a particular standard under development, such measures include a provision that encourages non-participant holders of such patents to disclose the patents and provisions regarding requests for licensing declarations from holders of such patents. The United States is concerned by any suggestion that standards-related disclosure and licensing obligations extend to patent holders electing not to participate in standards development.
​IPR protection for pharmaceutical products
The United States has engaged intensively with China to address troubling obstacles to obtaining and maintaining patents on pharmaceutical innovations. Although SIPO guidelines governing the review of patent applications were once generally consistent with those of the United States and leading patent offices in other countries, China's revised interpretation severely restricted a patent applicant's ability to provide supplemental information in support of an application. As a result, China has denied pharmaceutical patent applications and invalidated existing patents, even with respect to applications and patents consistently awarded by U.S. and other patent offices. This problem was the subject of great attention during Vice President Biden's visit to Beijing in November 2013 and the annual meeting of the JCCT the following month. These engagements resulted in China's revision of the policy on information supplementation, and a commitment to work with the United States to follow up on implementation, including the examination of individual cases.
In addition, the United States continues to have concerns about the extent to which China provides effective protection against unfair commercial use, as well as unauthorized disclosure of undisclosed test or other data generated to obtain marketing approval for pharmaceutical products. Under Chinese law and international commitments, China is required to ensure that no subsequent applicant may rely on the undisclosed test or other data submitted in support of an application for marketing approval of new pharmaceutical products for a period of at least six years from the date of marketing approval in China. However, there are reports that generic manufacturers have been granted marketing approvals by the China Food and Drug Administration (CFDA) prior to the expiration of this period, and in some cases, even before the originator's product has been approved. The United States was encouraged by China's 2012 JCCT commitment to define "new chemical entity," a term that is central to the marketing approval process, in a manner consistent with international practice. Given that more than a year has passed since that time, the United States is urging China to implement its commitment without delay.
On November 12, 2013, CFDA invited comment on draft amendments to the Drug Registration Rules (DRR). The United States and industry expressed concern that the proposed deletion of Article 19 from the DRR would weaken regulatory pharmaceutical patent enforcement. CFDA subsequently issued a revised draft that retained Article 19, albeit in modified form. The United States will continue to engage with China on this and other issues.
Utility model and design patents
For years, the U.S. Government and U.S. rights holders have expressed concerns about the quality of China's utility model and design patents, which SIPO grants without substantive examination and which China encourages through subsidies and other incentives. The poor quality of many of these patents has led to abusive litigation, and burdens on legitimate businesses seeking to make patentability or freedom to operate determinations. After receiving comments on a prior draft, amendments to SIPO's patent examination guidelines for utility model and design patents came into force on October 15, 2013. Although the new guidelines do not require substantive examination, they permit examiners to gather additional information in certain cases at their discretion. The impact of the recent change is still difficult to assess, but the amendments appears to be a welcome initial step.
​On May 1, 2014, new SIPO examination guidelines take effect allowing the grant of design patents on graphical user interfaces (GUIs). This welcome step comes after sustained U.S. engagement, although the impact of certain provisions in the guidelines pose the potential to undermine at least some of the apparent gains.
The United States looks forward to continuing to work with China to resolve these and other issues.
India
India remains on the Priority Watch List in 2014. In making this determination, the United States recognizes not only the concerns listed below, but also the critical role that meaningful, constructive, and effective engagement between India and the United States should play in resolving these concerns. Serious difficulties in attaining constructive engagement on issues of concern to U.S. and other stakeholders have contributed to India's challenging environment for IPR protection and enforcement. In the coming months, the United States will redouble its efforts to seek opportunities for meaningful, sustained, and effective engagement on IP-related matters with the new government, including at senior levels and through technical exchanges, that will both improve IP protection and enforcement in India, and support India's efforts to achieve a "Decade of Innovation" and advance its legitimate public policy goals. These opportunities include strengthening IP-related discussions between U.S. and Indian government officials; facilitating regular exchanges among IP-intensive industries and both governments; initiating cooperative efforts to combat piracy; and working with the Government of India to encourage the private sector to establish an IP-related task force under the U.S.-India CEO Forum. To further encourage progress on IPR issues of concern, USTR will publish a Federal Register notice and initiate an Out-of-Cycle Review (OCR) of India in the fall of 2014, commencing an assessment of the progress in that engagement.
In 2013, India made some limited progress in improving its weak IPR legal framework and enforcement system. India acceded to and implemented the Madrid Protocol; continued progress toward digitization of cable networks to help efforts to combat signal theft by cable operators; and enacted rules to implement amendments to its Copyright Act. 2013 also saw more active copyright enforcement by the Delhi High Court through the issuance of Ashok Kumar and Anton Piller orders, which provide injunctive relief to rights holders.
In many areas, however, IP protection and enforcement challenges are growing, and there are serious questions regarding the future of the innovation climate in India across multiple sectors and disciplines. In fact, many of the submissions made by a wide array of stakeholders in this year's Special 301 reporting process underscored increasing challenges rights holders face in India, and a number of those submissions sought the strongest censure of India's IP environment available under Special 301. The United States urges India to take specific actions to address the concerns raised, including by means of constructive bilateral engagement. The United States also urges India to reconsider how to meet its legitimate domestic policy objectives while fostering a climate for innovation. The United States continues to encourage India to strengthen civil IPR enforcement by increasing judicial efficiency and reducing court backlogs through electronic case management, fast-track procedures, specialized judges, and similar reform measures. In addition, the United States supports India's efforts to initiate criminal investigations and launch raids at counterfeit goods markets; combat the manufacture, sale and ​distribution of counterfeit medicines; initiate investigations and judicial actions against Internet piracy; and seek deterrent sentences against persons or entities engaging in copyright piracy and trademark counterfeiting.
Copyright and Piracy
India boasts a vibrant domestic creative industry, but it faces a range of challenges, including growing piracy, particularly over the Internet, that should be addressed through appropriate legal and enforcement reforms. The United States continues to seek additional changes to the amended Copyright Act and related rules that went into effect in 2013. These changes would help resolve questions regarding the scope of exclusive rights under Indian law and the ability of rights holders to exercise those rights. They would also help ensure that content-based industries can effectively combat physical and online piracy and develop new models for the delivery of content, particularly in the digital environment. The United States encourages India, as part of its copyright and enforcement reforms, to enact anti-camcording legislation; to model its statutory license provisions relating to copyrighted works upon Berne Convention standards; to ensure that collecting societies are licensed promptly and able to operate effectively; and to provide additional protections against signal theft, circumvention of technological protection measures, and online copyright piracy.
The United States is particularly concerned over online piracy in India given the size and growth of India's market. According to a report by McKinsey & Company, as of December 2012, India's Internet user base was the third largest in the world, with 120 million users, and by 2015, India will have the world's second largest user base, estimated at 330-370 million Internet users. This trend makes it all the more imperative that India incorporate into its legal system more effective measures to counter online piracy, including appropriate notice-and-takedown procedures and other efficient mechanisms for rights holders to seek removal of infringing content from websites, consistent with international best practices.
The high incidence of camcording in India underscores the importance of developing an effective legal framework to address this problem. India has one of the highest rates of video piracy in the world, according to the Motion Pictures Distributors Association of India (MPDA). Moreover, according to the Motion Picture Association (MPA), camcording incidents involving motion pictures produced by MPA member studios alone have risen rapidly over the past few years, with 155 forensic matches traced to India from 2009 to 2011. In 2013 alone, there were reportedly 43 such forensic matches, accounting for approximately half of all such incidents in the Asia-Pacific in that year. These incidents do not take into account camcording of films produced by non-MPA members, including many films produced in India and elsewhere in the world. The United States welcomes statements made by the Ministry of Information and Broadcasting that it plans to include specific anti-camcording provisions in the draft Cinematographic Bill, and the support of the government of Andhra Pradesh that helped launch in 2013 the India Movie Cop app developed by that state's film industry.
The United States notes limited improvements with respect to copyright enforcement, including reports that enforcement officials cooperate with music industry rights holders in conducting complaint-based raids, and increased use of judicial orders that have strengthened enforcement against pirated movies and music online. The United States encourages India to take additional steps to improve coordination with enforcement officials of state governments within India.
​To strengthen engagement on these and other copyright issues, and to build upon the strengths of the vibrant Indian and U.S. copyright-intensive industries, including in movies, music, and software, the United States would welcome closer bilateral cooperation with India in addressing the challenges of copyright piracy of U.S. and Indian content globally, including, for example, cooperation and exchanges at the technical level between copyright protection and enforcement experts in each government.
Patents & Regulatory Data Protection
The United States continues to encourage India to promote a stable and predictable patent system that nurtures and incentivizes innovation. As leading economies with a strong tradition of innovation, India and the United States can and should ensure supportive environments for innovators to achieve success and make significant contributions to economic growth in both countries.
The United States commends India on actions taken in recent years to improve the operations of its Patent Office, including digitizing records, upgrading online search and e-filing capabilities, and hiring additional patent examiners. The United States urges India to continue its recent efforts to address its patent application backlog. The United States welcomes recent statements from India's Controller-General of Patents regarding plans to hire 500 patent examiners in the next five years, as well as a Delhi High Court decision ordering a committee of senior officials to develop a plan of action to address the backlog and ensure that future applications are processed within the statutory deadline. The United States encourages greater technical collaboration between patent authorities in both countries that would facilitate the more timely examination of patent applications.
Recent actions by the Government of India with respect to patents, however, have raised serious concerns about the innovation climate in India and risk hindering India's progress towards an innovation-focused economy. In the pharmaceutical sector and increasingly in other sectors, such as the agro-chemicals and green technology sectors, some innovators face serious challenges in securing and enforcing patents in India. In recognition of the fact that an environment conducive to the protection and enforcement of IP can help to address pressing domestic policy challenges, the United States encourages India to adopt policies that support both cutting-edge innovation to address important health challenges and a robust generic market.
For example, a patent system should encourage the development of inventions that meet the well-established international criteria of being new, involving an inventive step, and being capable of industrial application, including as provided for in the TRIPS Agreement. Under India's Patents Act, a patent is available for an "invention," defined in Section 2(j) of the Act as a product or process that is novel, has an inventive step, and is capable of industrial application. Section 3(d) of India's Patent Act states in relevant part that "the mere discovery of a new form of a known substance which does not result in the enhancement of the known efficacy of that substance" is not considered to be an "invention" under Indian law. As the Indian Supreme ​Court recently explained, in the case of patent applications for pharmaceuticals and other chemicals:
The amended portion of section 3(d) clearly sets up a second tier of qualifying standards for chemical substances/pharmaceutical products in order to leave the door open for true and genuine inventions …. [O]n reading [section 2] with section 3(d) it would appear that the Act sets different standards for qualifying as 'inventions' things belonging to different classes, and for medicines and drugs and other chemical substances, the Act sets the invention threshold higher, by virtue of [section 3(d)]. … [I]n case of chemicals and especially pharmaceuticals if the product for which patent protection is claimed is a new form of a known substance with known efficacy, then the subject product must pass, in addition to clauses (j) and (ja) of section 2(1), the test of enhanced efficacy as provided in section 3(d) read with its explanation.
The United States is concerned that section 3(d), as interpreted, may have the effect of limiting the patentability of potentially beneficial innovations. Such innovations would include drugs with fewer side effects, decreased toxicity, improved delivery systems, or temperature or storage stability. In practice, this standard has already been applied to deny patent protections to potentially beneficial innovations, some of which enjoy patent protection in multiple other jurisdictions.
Even after a product receives a patent, Indian law continues to pose challenges to the enjoyment of that IPR protection.
First, the United States supports patent systems that incorporate efficient patent procedures and foster high-quality patents, and, in that connection, urges India to improve and streamline its patent opposition procedures. Specifically, under India's patent regime, the same interested person may, at minimal cost, challenge a patent through both pre-grant and post-grant opposition proceedings on any of eleven enumerated grounds, including by citing the same grounds in both pre- and post-grant challenges. As a result, applications can be tied up in costly challenge proceedings for years, all the while running the potential term of the patent which begins from the application filing date, thus impeding an applicant's ability to make investments and conduct business.
Second, while bearing in mind the Doha Declaration on TRIPS and Public Health, discussed in the Intellectual Property and Health Policy section of this Report, the United States also continues to monitor developments concerning compulsory licensing of patents in India. The United States urges India to provide greater transparency about its ongoing inter-ministerial process that is considering over a dozen patented medicines as candidates for government-initiated compulsory licenses, and urges India to allow opportunities for input by rights holders, as appropriate, with respect to decisions concerning compulsory licenses.
In addition, the United States continues to be concerned with the rationale underlying a decision by India's Controller-General of Patents to grant a compulsory license under Section 84 of India's Patents Act (which allows private parties to initiate proceedings seeking a compulsory ​license of a patented article), as upheld by a recent judgment of the IPAB. The grant of the compulsory license was based, in part, on the innovator's failure to "work" the patent in India because it imported its products, rather than manufacturing them in India. The United States recognizes that, on appeal, the IPAB modified the Controller-General's reasoning to clarify that "in some cases" the "working" requirement could be met solely by importation. The IPAB, however, rejected the innovator's explanation that economic factors prevented manufacturing in India, stating, "the patentee must show why it could not be locally manufactured. A mere statement to that effect is not sufficient[,] there must be evidence." The IPAB did not clarify the circumstances under which the "working" requirement would be met without manufacturing in India. The decision could inappropriately pressure innovators outside of India – including those in sectors well beyond pharmaceuticals, such as green technology and information and communications technology – to manufacture in India in order to avoid being compelled to license an invention to third parties. The IPAB's decision is currently on appeal to the Bombay High Court.
Although the government has issued only one compulsory license under Section 84, India has made clear that it views compulsory licensing as an important tool of industrial policy for green technologies, with the potential to be applied more regularly across economic sectors. Specifically, India has promoted compulsory licensing in its National Manufacturing Policy as a mechanism available for government entities to effectuate technology transfer in the clean energy sector. India similarly has sought to multilateralize this approach in ongoing negotiations under the UNFCCC. In those negotiations India continues to identify patents as obstacles to the dissemination of climate change technologies, pressing for outcomes that would potentially undermine incentives for innovation, such as existing global standards for patent protection that is a critical part of the response to climate change and other environmental challenges.
The United States also notes with concern the continuing challenges involved with enforcement of patent rights in India, including challenges that patent holders face in securing injunctions against firms that manufacture patented inventions without authorization from the patent holder. Additionally, when approving such manufacture without authorization, Indian state governmental authorities reportedly do not have a mechanism to confirm whether the item to be manufactured is under patent. Recent cases such as Merck v. Glenmark and Cipla v. Roche illustrate this problem and underscore the need for greater regulatory coordination between officials in state and central governments.
Finally, the United States also urges India to provide an effective system for protecting against unfair commercial use, as well as unauthorized disclosure, of undisclosed test or other data generated to obtain marketing approval for pharmaceutical and agricultural chemical products, and to ensure that such a system applies to all pharmaceutical products and not just traditional Indian medicines. It is noteworthy, however, that the Pesticides Management Bill, currently before Parliament, includes provisions for data protection of agricultural chemicals for five years, although that time period begins with the product's first marketing approval anywhere in the world. Meanwhile, data protection for pharmaceuticals remains under consideration by the Ministry of Health and Family Welfare. Without these types of protections in place against the unfair commercial use of clinical test data, companies in India reportedly are able to copy certain ​pharmaceutical products and seek immediate government approval for marketing based on the original developer's data.
* ↑ Section 3(d) contains a further Explanation stating that "[f]or the purposes of this clause [3(d)], salts, esthers, ethers, polymorphs, metabolites, pure form, particle size, isomers, mixtures of isomers, complexes, combinations and other derivatives of known substance shall be considered to be the same substance, unless they differ significantly in properties with regard to efficacy."
* ↑ Novartis AG v. Union of India & Others, Civ. App. Nos. 2706-2716 (Supreme Court, April 1, 2013), paragraphs 103, 104, and 192 (emphasis added).
* ↑ Decision of the Intellectual Property Appellate Board, Chennai, March 4, 2013, OA/35/2012/PT/MUM, Paragraph 52
Trademarks and Counterfeiting
The United States continues to observe significant delays associated with cancellation and opposition proceedings at the administrative level of the Trademark Registry, which are exacerbated by delays in India's judicial processes. While opposition and cancellation proceedings are complex matters that require careful consideration, the reported backlog of more than 160,000 cases represents a significant challenge for companies trying to invest and build brands in India. These delays undermine enforcement mechanisms and their ability to discourage infringing conduct. The United States urges India to take steps to expedite proceedings before the Trademark Registry.
Additionally, the production, sale, distribution, import, and export of counterfeit goods in India remains very troubling. In a study published in September 2013 by the International Chamber of Commerce and the Federation of Indian Chambers of Commerce and Industry analyzing seven key industry sectors vulnerable to counterfeiting and smuggling (automotive parts, alcohol, computer hardware, personal goods, packaged foods, mobile phones, and tobacco products), researchers concluded that unauthorized counterfeiting and smuggling caused average sales losses to right holders of 21.7 percent or approximately $11.9 billion in 2012. Collectively, the Indian government's economic loss tied to these illicit activities totaled approximately $4.26 billion, according to the study. This problem is particularly troubling with respect to the production and distribution of counterfeit pharmaceuticals. While India is one of the world's largest producers of legitimate, high-quality generic pharmaceuticals, and the United States is India's largest single export market for generic pharmaceuticals, India is also the top supplier of counterfeit pharmaceuticals to the United States, according to U.S. Customs and Border Protection data and analysis.
Trade Secrets
The United States is increasingly concerned about trade secret protection in India, particularly the reported difficulty in obtaining remedies and damages. India appears to rely primarily upon the law of contract to provide trade secret protection. Although India's contract-based approach may address the theft of trade secrets where a contract has been breached, India's approach may be less effective in covering situations in which there is no contractual relationship, such as in cases of theft by a business competitor. Although Indian law does provide for some remedies, including injunctive relief, in practice, damages can be very difficult to obtain. Finally, because India's court system reportedly lacks sufficient procedural safeguards to protect trade secrets or other confidential information divulged through discovery in civil or criminal litigation, there is a risk that such information may be disclosed publicly in the course of judicial proceedings.
Localization Trends
The United States commends India's recognition of the importance of innovation in connection with its efforts to promote manufacturing, but urges India to resist imposing discriminatory or other trade-restrictive measures in pursuit of that objective at the expense of adequate and effective protection of IPR. The United States welcomes India's decision to revise the Preferential Market Access (PMA) policy, which previously contained elements that appeared to ​treat India-owned IP more favorably than foreign-owned IP. The United States remains concerned, however, about actions and policies in India that appear to favor local manufacturing or Indian IP owners in a manner that distorts the competitive landscape needed to ensure the development of globally successful and innovative industries. For example, last year's Drug Price Control Order (DPCO) imposes pricing restrictions on the sale of 348 medicines, but provides exemptions from those restrictions—that is, allows them to be priced at higher levels—for certain medicines that are manufactured in India and "developed using indigenous Research and Development." In addition, as noted above, the IPAB's interpretation of Section 84 of India's Patents Act suggests that a patent could be subject to a compulsory license if it is not manufactured in India.
The United States looks forward to continuing to work with India to address these and other issues.
Russia
Russia remains on the Priority Watch List in 2014 as a result of continued, significant challenges to IPR protection and enforcement. Russia passed amendments to its Civil Code that substantially weakened protections for industrial designs and introduced confusion into the available scope of copyright exceptions and limitations.
The United States is troubled that IPR enforcement continued to decrease overall in 2013, following a dramatic decline in 2012, and remained plagued by a lack of transparency and effectiveness. Stakeholders express concern about the manufacture, transshipment and retail availability of counterfeit goods, including counterfeits of agricultural chemicals, electronics, information technology, auto parts, consumer goods, machinery, and other products. Enforcement actions combatting end user piracy have sharply declined, including a decrease in raids, initiations of criminal cases, and issuances of court verdicts.
The United States urges Russia to develop an appropriately strong, more transparent, and more effective legal framework and enforcement strategy to reduce the sale of counterfeit goods online and piracy of copyright-protected content. Counterfeit pharmaceuticals are reportedly manufactured in Russia and made available through online pharmacies. The United States notes that Russian courts issued the first two criminal convictions for online piracy this year. Both resulted in suspended sentences, and one also included a fine. It is reported that both cases required investigations of multiple years and that there is little interest in future prosecutions of this type by law enforcement officials. Russia remains home to many sites facilitating online piracy, which damage both the legitimate content market in Russia as well as third-country markets.
Russia has not issued regulations clarifying the protection against the unfair commercial use, as well as unauthorized disclosure, of test and other data generated to obtain marketing approval for pharmaceutical products. Russia has also not enacted a formal review and improvement of its collecting society system, which is nontransparent and burdensome. The United States will continue to monitor Russia's progress on these and other matters.
​Algeria
Algeria remains on the Priority Watch List in 2014. The United States welcomes Algeria's intensive work on intellectual property awareness, its accession to the WIPO Internet Treaties, and improved coordination of enforcement agencies and looks forward to seeing tangible results from this work. However, Algeria's ban on a number of imported pharmaceutical products and medical devices in favor of local products is a trade matter of paramount concern, and is the reason Algeria remains on the Priority Watch List. The United States looks forward to continuing its engagement with Algeria, including in the context of Algeria's efforts to accede to the WTO, and urges Algeria to remove this market access barrier.
Argentina
Argentina remains on the Priority Watch List in 2014, a position it has occupied since 1996. Argentina has made little progress in improving protection and enforcement of intellectual property rights over the past year. Significant concerns remain with respect to the high levels of piracy and counterfeiting, including in the digital environment, and the lack of political will to address the situation, although Argentina's customs and tax authority (AFIP) has conducted some enforcement operations. A prime example of the absence of even basic enforcement of IP laws is the continued growth and expansion of the Notorious Market La Salada, and its owners' ability to continue operating with impunity. Delays in the acquisition of IP rights, and a lack of transparency for patentability criteria, also raise concerns. Argentina's patent application backlog is growing, a problem that could be alleviated by Argentina's accession to the Patent Cooperation Treaty (PCT), if the political will to do so existed. Argentina also fails to provide effective protection against unfair commercial use or unauthorized disclosure of test and other data generated to obtain marketing approval for pharmaceutical products. The United States looks forward to continuing to work with Argentina to address these and other issues.
Chile
Chile remains on the Priority Watch List in 2014. The United States continues to have serious concerns regarding outstanding IPR issues under the United States-Chile Free Trade Agreement. The United States continues to urge Chile to implement an effective system for addressing patent issues expeditiously in connection with applications to market pharmaceutical products. The United States also continues to urge Chile to implement both protections against the unlawful circumvention of technological protection measures and protections for encrypted program-carrying satellite signals. Chile must also ensure that effective administrative and judicial procedures, as well as deterrent remedies, are made available to rights holders and satellite and cable service providers, including measures to address ongoing concerns with decoder boxes. The United States also urges Chile to provide adequate protection against unfair commercial use, as well as unauthorized disclosure, of undisclosed test or other data generated to obtain marketing approval for pharmaceutical products. Finally, the United States urges Chile to amend its Internet service provider (ISP) liability regime to permit effective action against piracy over the Internet and to also take steps to improve the protection of plant varieties. The United States ​looks forward to continuing to work with Chile to resolve these and other issues, including through the TPP negotiations.
Indonesia
Indonesia remains on the Priority Watch List in 2014. Indonesian authorities have continued educational outreach to the public to advance IPR awareness and have engaged with the United States through the IPR Working Group under the United States-Indonesia Trade and Investment Framework Agreement to develop an action plan to improve IPR protection and enforcement to address high levels of IPR infringement in Indonesia. The United States welcomes reports of enforcement raids conducted against counterfeit and pirated goods, as well as a reported increase in actions against counterfeit and substandard pharmaceutical products. However, the United States remains concerned about gaps in Indonesia's laws relating to the protection and enforcement of IPR, and urges Indonesia to address these issues. The United States is also concerned that Indonesia's IPR enforcement efforts, despite the raids mentioned above, have not been effective in addressing rampant piracy and counterfeiting, reflected in growing piracy over the Internet and widely available counterfeit pharmaceutical products. The United States urges Indonesia to take steps to address inefficiencies in its judicial and prosecutorial systems which include a lack of transparency and deterrent-level sentences. In regard to cable piracy, Indonesia has conducted outreach to raise public awareness about unauthorized distribution of cable signals and Indonesia's continuing licensing process. However, these efforts have had little or no impact to date on widespread cable piracy. The United States continues to encourage Indonesia to provide an effective system for protecting against the unfair commercial use, as well as unauthorized disclosure, of undisclosed test or other data generated to obtain marketing approval for pharmaceutical and agricultural chemical products. The United States also remains concerned about market access barriers in Indonesia, including measures that appear to condition permissions to import medicines on at least partial local manufacturing or technology transfer requirements. Other measures that could restrict market access relate to the importation of motion pictures. The United States remains concerned by Indonesian government statements indicating that Indonesia failed to abide by Indonesian legal procedures in issuing a compulsory license decree in 2012, and indicating that Indonesian patent law does not require individual merits review in connection with the grant of compulsory licenses. The United States further encourages Indonesia to provide for judicial or other independent review of any compulsory license authorizations. The United States looks forward to working with Indonesia on these and other matters.
Pakistan
Pakistan remains on the Priority Watch List in 2014. Although Pakistan has continued its efforts to advance IPR enforcement, including through raids, seizures, and arrests by various enforcement authorities, there have not been significant improvements in its overall IPR protection. Pakistan has not yet fully implemented the Intellectual Property Organization of Pakistan Act of 2012 (IPO Act). Notably, Pakistan has yet to establish the specialized IP tribunals and an operational IPO Policy Board provided for under the IPO Act. Widespread ​counterfeiting and piracy, particularly book and optical disc piracy, continue to present serious concerns for U.S. industry. Pakistan should ensure that its enforcement officials can exercise ex officio authority without the need for a formal complaint by a rights holder, and should provide for deterrent-level penalties for criminal IPR infringement. Pakistan should also take the necessary steps to reform its copyright law to address the piracy challenges of the digital age. The United States continues to encourage Pakistan to provide an effective system for protecting against unfair commercial use, as well as unauthorized disclosure, of tests and other data generated to obtain marketing approval for pharmaceutical products. The United States appreciates Pakistan's interest in improving its IPR environment and looks forward to working with Pakistan to address these and other issues, including in connection with Pakistan's implementation of the IPO Act.
Thailand
Thailand remains on the Priority Watch List in 2014. The United States remains encouraged by Thailand's stated commitment to improving IPR protection and enforcement, and is hopeful that the National IPR Center of Enforcement, launched in March 2013, will help to improve coordination and allow for more effective enforcement actions among Thai enforcement agencies. The United States urges Thailand to complete many of the legislative initiatives begun in past years, including: legislation to address landlord liability and unauthorized camcording of motion pictures in theaters; to provide Thai Customs with ex officio authority; to fully implement the provisions of the WIPO Internet Treaties; to restructure the Trade Secret Committee and modify penalty provisions under the Trade Secrets Act; to accelerate patent examination and registration procedures and address issues such as partial designs; and to establish improved legal mechanisms to address the rapidly growing problem of copyright piracy and trademark counterfeiting on the Internet. The United States also urges Thailand to take enforcement action against widespread piracy and counterfeiting in the country; to impose deterrent-level sentences; and to address effectively its longstanding problem of piracy of cable and satellite signals. The United States continues to encourage Thailand to provide an effective system for protecting against the unfair commercial use, as well as unauthorized disclosure, of test or other data generated to obtain marketing approval for pharmaceutical and agricultural chemical products. The United States urges Thailand to engage in a meaningful and transparent manner with all relevant stakeholders, including IPR owners, as it considers ways to address Thailand's public health challenges, while maintaining a patent system that promotes innovation. The United States looks forward to continuing to work with Thailand to address these and other issues.
Venezuela
Venezuela remains on the Priority Watch List in 2014. Issues of continuing concern include: questions about the consistency of domestic laws and international obligations resulting from the 2008 reinstatement of the 1955 Industrial Property Law; the status of trademarks that were registered under the Andean Community law prior to Venezuela's withdrawal from the Andean Community; and lack of enforcement against counterfeiting and piracy, both physical and online. The United States also continues to encourage Venezuela to provide an effective system for ​protecting against the unfair commercial use, as well as unauthorized disclosure, of undisclosed test or other data generated to obtain marketing approval for pharmaceutical products.
WATCH LIST
Barbados
Barbados remains on the Watch List in 2014. The United States continues to be concerned in Barbados and throughout the Caribbean region about the interception and retransmission of United States cable programming by local cable operators without the consent of, and without adequately compensating, United States rights holders. The United States also continues to have concerns in Barbados and throughout the region about the refusal of local TV and radio broadcasters and cable/satellite operators to pay for public performances of music. (See Section I). The United States urges the Government of Barbados to take all administrative actions necessary, without undue delay, to ensure that all composers and songwriters receive the royalties they are owed for the public performance of their musical works. In addition, the United States urges the Government of Barbados to adopt copyright legislation that protects works in both the physical and online environments and to take steps to prevent the unauthorized and uncompensated retransmission of copyrighted musical and audiovisual content. The United States looks forward to working with Barbados to resolve these and other issues.
Belarus
Belarus remains on the Watch List in 2014. Despite recent efforts to improve enforcement against IP infringements, including methods for collecting and preserving evidence of IPR violations involving the Internet, piracy and counterfeiting remain widespread. Belarus has still not passed amendments to the Criminal, Administrative and Procedural codes originally proposed in 2011, and has not yet established civil remedies or criminal penalties for online piracy. The United States appreciates the government's decision to approve the Eurasian Economic Commission Board's agreement on coordination of measures to protect IPR and encourages Belarus to further harmonize its IPR regime with the regulatory principles adopted under the Customs Union. For example, Belarus could improve the investigation of suspected infringement cases, seizure of infringing goods, and prosecution of IPR violations by creating the unified trademark registry and implementing and exercising the ex officio authority provisions of the Customs Union Customs Code. The United States appreciates recent outreach by Belarus on IPR matters and looks forward to working with Belarus on these and other issues.
Bolivia
Bolivia remains on the Watch List in 2014. The Government of Bolivia has undertaken public awareness efforts and has made some enforcement attempts, but rampant piracy and counterfeiting persist. The United States encourages Bolivia to take steps to improve its enforcement of IPR, including by improving coordination among Bolivian enforcement authorities and with the authorities of its neighboring countries.
​Brazil
Brazil remains on the Watch List in 2014. Brazil continues on a generally positive trajectory regarding both its domestic intellectual property rights (IPR) policy and its enforcement of IPR. Brazil has taken steps to address a backlog of pending patent and trademark applications, including by authorizing the hiring of for new examiners, but very long delays still exist. Brazil has also continued to make progress in enhancing the effectiveness of IPR enforcement, conducting raids across the country under the coordination of the National Council to Combat Piracy. Significant concerns remain with respect to the high levels of counterfeiting and piracy, including Internet piracy; however, positive strides have been made in the area of pay-television piracy. Although laudable enforcement efforts also have occurred at the border, greater emphasis on this challenge is needed, particularly in the tri-border region, including the issuance of more deterrent penalties in such cases. Concerns also persist with respect to Brazil's inadequate protection against unfair commercial use of undisclosed test and other data generated to obtain marketing approval for pharmaceutical products. In addition, regulations that provide Brazil's health authority, the National Sanitary Regulatory Agency (ANVISA), with the authority to review pharmaceutical patent applications for patentability requirements are not transparent or predictable and appear to contravene earlier opinions by the Federal Attorney General, which clarified that ANVISA does not have such authority. The United States is also concerned about a series of lawsuits recently filed by Brazil's National Industrial Property Institute (INPI) seeking to invalidate or shorten the term of certain "mailbox" patents for pharmaceutical and agrochemical products. The United States believes it is important for Brazil to continue to create an IP climate that affords both domestic and foreign IP holders with incentives to invest in the market. We look forward to engaging constructively with Brazil in support of its work in the IPR arena and to address remaining concerns.
Bulgaria
Bulgaria is on the Watch List in 2014. Despite some limited improvements, the United States continues to have serious concerns regarding IPR infringement in Bulgaria. Copyright piracy over the Internet in Bulgaria remains a significant problem in this market. Numerous online infringing services operate in the market and enforcement actions seldom result in convictions or deterrent sentences. Investigations on copyright piracy, including against enterprise end-user software piracy, initiated by the Bulgarian anti-cybercrime unit have stalled because that unit's responsibilities and personnel were transferred to a different agency. The number of working sessions of the Council for IPR Protection have declined and there are fewer staff in the Copyright Office of the Ministry of Culture, twin events that have weakened Bulgaria's ability to effectively enforce its IP laws. Collecting societies continue to report serious challenges in collecting royalties and in enforcing their rights through administrative or judicial actions. High levels of trademark counterfeiting also persist. The government has reduced staffing at the Patent Office, which is responsible for registrations (e.g., patents and trademarks) as well as certain enforcement functions (e.g., inspections, issuance of fines, and sentencing in cases referred from criminal courts), thereby hindering that office's ability to make sufficient routine inspections or to conduct adequate enforcement. Bad faith trademark applications are also a ​growing concern and are often granted due to these constraints at the Bulgarian Patent Office. Unfortunately, a lack of coordination between investigation and prosecution authorities creates inefficiencies in the effective enforcement of IP cases, which is compounded by inadequacies in the Bulgarian judicial system. Generally, rights holders face significant delays in the adjudication of IPR disputes, many of which do not reach final sentencing, and when they do, remedies are not a deterrent to further infringements. Bulgaria's government should coordinate with rights holders and other interested parties, such as Internet service providers (ISPs), to develop recommendations for reducing Internet piracy. We also encourage Bulgaria to engage in meaningful follow-up on its Mass Software Compliance Campaign initiated by the Ministries of Culture and Interior in early 2013. Notwithstanding these continuing issues, the United States recognizes the positive steps Bulgaria has taken to address IPR infringement in its market. For example, Bulgaria has been able to engage in certain enforcement actions, including those led by the Ministry of Culture. The Ministry of Culture's Copyright Office also facilitated a royalty payment agreement between the holders of film rights and the Bulgarian Association of Cable and Communication Operators (BACCO). The United States encourages Bulgaria to continue to enhance its IPR protection and enforcement efforts and intensify its engagement on IPR public awareness. The United States looks forward to continuing to work with Bulgaria to address these and other issues.
Canada
Canada remains on the Watch List in 2014. On copyright issues, the United States welcomed the passage of the Copyright Modernization Act in June 2012. As part of Canada's implementation of this law, the United States urges Canada to implement its WIPO Internet Treaties commitments in a manner consistent with its international obligations and to continue to address the challenges of copyright piracy in the digital age. Regarding border enforcement issues, Canada re-introduced the Combating Counterfeit Products Act in October 2013 to strengthen IPR enforcement. The bill included provisions that would provide ex officio authority to Canadian customs officials to seize pirated and counterfeit goods at the border. The United States supports Canada's commitment to address the serious problem of pirated and counterfeit goods entering our highly integrated supply chains and urges Canada, as it proceeds with this legislation, to expand its scope to provide authority for its customs officials to take action against such goods in-transit. With respect to pharmaceuticals, the United States continues to have serious concerns about the availability of rights of appeal in Canada's administrative process for reviewing regulatory approval of pharmaceutical products. The United States also has serious concerns about the lack of clarity and the impact of the heightened utility requirements for patents that Canadian courts have applied recently. Under this amorphous and evolving standard, courts can invalidate a patent on utility grounds by construing the "promise of a patent" years after the patent has been granted, leading to uncertainty for patent holders and applicants and undermining incentives for investment in the pharmaceutical sector. In applying this standard, courts have invalidated a number of patents held by U.S. pharmaceutical companies, finding now that those products lack utility (i.e., not capable of industrial application), even though such products have been in the market and benefiting patients for years. The United ​States will closely monitor developments on these issues and looks forward to continuing to work with Canada to address these and other IPR issues, including through the TPP negotiations.
Colombia
Colombia remains on the Watch List in 2014. The Government of Colombia has made tangible progress in the areas of internal coordination of enforcement agencies, reducing patent application backlogs, and training judges and law enforcement officials on IPR issues. However, earlier progress on IPR legislation was reversed in 2013 when the Colombian Constitutional Court invalidated on procedural grounds the law enacting many IPR-related commitments made under the United States-Colombia Trade Promotion Agreement (CTPA). Colombia has not yet reestablished the provisions contained in the earlier invalidated law. In addition, Colombia's limitations on the patentability of certain pharmaceuticals and challenges related to pharmaceutical and agrochemical data protection are areas of concern. The United States urges Colombia to implement geographical indications protections in a manner that is consistent with its obligations under the CTPA. Persistently high levels of both hard goods and Internet piracy continue to plague the country in spite of periodic, laudable enforcement efforts. For example, Colombia's San Andresitos markets remain rife with counterfeit and pirated products and were again named in USTR's Notorious Markets List in 2013. Greater enforcement attention is needed to disrupt organized distribution of illicit goods, including in the border areas. The United States looks forward to continuing constructive engagement with Colombia on these and other matters.
Costa Rica
Costa Rica remains on the Watch List in 2014. Costa Rica's efforts to address certain longstanding problems have not yet taken hold and new problems have arisen in the meantime. Several long-term concerns relate to weak IPR enforcement. Few criminal prosecutions result in deterrent-level sentencing in Costa Rica, despite growing evidence of links between certain IPR infringement and organized crime. The United States applauded a 2011 announcement that a specialized IPR prosecution unit would be created, but it is unclear whether that initiative is actually underway. Similarly, while the government of Costa Rica announced a plan in 2010 to ensure that the government would use only licensed software, progress has been limited until recently, and actual results remain unknown. Costa Rican law still allows Internet service providers (ISPs) 45 days to forward infringement notices to subscribers, which represents a very long period of time, especially considering that certain content may be of relatively short-term interest to the public. Pharmaceutical patent holders report a number of concerns, including poorly defined exceptions to Costa Rica's data exclusivity regime. The United States encourages Costa Rica to engage with the private sector and other interested parties as it evaluates legislative reforms relating to health care. In terms of new problems, initial administrative determinations on applications to register certain geographical indications present a notable concern, as first-level authorities seemed not to acknowledge relevant evidence presented by interested parties in opposition. At the same time, Costa Rica has taken positive steps forward. Costa Rica has rolled out an electronically searchable trademark database, it has ​compiled better enforcement statistics, and it has formed and trained a new border police unit, which could have a positive impact on IPR enforcement. Given Costa Rica's demonstrated ability to address issues of its choosing, the United States urges Costa Rica to develop clear plans to tackle longstanding problems and to demonstrate tangible progress in implementing those plans prior to the next Special 301 review.
Dominican Republic
The Dominican Republic remains on the Watch List in 2014. While several positive developments merit recognition, substantial concerns remain, especially with respect to the widespread availability of pirated and counterfeit products. In terms of steps forward, Dominican Republic authorities have provided more effective regulatory protection against pharmaceutical patent infringement and have in individual cases provided for the protection of undisclosed test and other data generated to obtain marketing approval for pharmaceutical products against unfair commercial use and unauthorized disclosure, although the United States urges the Dominican Republic to clarify the governing procedural frameworks. The Dominican Republic has also made a trademark database available online. Nevertheless, IPR enforcement agencies in the Dominican Republic continue to experience a lack of coordination, resources, and training. As an example, the Dominican Republic reports enhanced enforcement efforts to address cable signal piracy, yet the private sector has not observed a substantial resulting impact. A major and unresolved problem is the Dominican Republic's large backlog of pending patent applications. Over 1,300 patent applications were pending as of January 2014, whereas less than 250 patent certificates were issued from 2000-2013. The multi-year delays in the patent application and examination process highlight the urgent need to reduce the backlog and to address outstanding concerns to implement CAFTA-DR obligations with respect to patent term adjustment. The United States looks forward to continuing to work with the Dominican Republic to address these and other issues.
Ecuador
Ecuador remains on the Watch List in 2014. The United States is very concerned about the recent de-criminalization of IPR infringement. Ecuador continues to experience high levels of piracy and counterfeiting and relatively low levels of enforcement. The repeal of the criminal enforcement provisions will only exacerbate the situation. On a positive note, Ecuador's Institute for Intellectual Property (IEPI) has undertaken public awareness efforts to attempt to address the rampant IP theft occurring in Ecuador, including at La Bahia, a 2013 Notorious Market. However, the United States remains concerned about the institutional weakening of IEPI under a 2012 government reorganization. Furthermore, IEPI's 2012 enactment of exorbitant fees for patent and plant variety registration and maintenance, and the lack of protection against unfair commercial use, as well as unauthorized disclosure, of undisclosed test or other data generated to obtain marketing approval for pharmaceutical and agricultural chemical products could have an adverse effect on foreign investment in those sectors.
​Egypt
Egypt remains on the Watch List in 2014. IPR challenges for Egypt include the failure to obtain deterrent-level sentences for IPR violations that are prosecuted and the need for additional training for enforcement officials. Egypt has not issued regulations to clarify border procedures for the destruction of counterfeit and pirated products and to provide customs officials with the authority to take ex officio action. The United States urges Egypt to clarify its protection against the unfair commercial use, as well as unauthorized disclosure, of undisclosed test or other data generated to obtain marketing approval of pharmaceutical products. Although Egypt is working to upgrade its trademark system, rights holders have expressed concerns about the registration of trademarks filed in bad-faith. Rights holders have reported certain market access impediments, such as fees and taxes applied to foreign films. The United States appreciates Egypt's recent engagement on many of these and other IPR issues and stands ready to work with Egypt to improve its IPR regime.
Finland
Finland remains on the Watch List in 2014. The United States continues to be concerned about the lack of product patent protection for certain pharmaceutical products. U.S. industry also has expressed concern that the regulatory framework in Finland regarding process patents filed before 1995, and pending in 1996, denies adequate protection to many of the top-selling U.S. pharmaceutical products currently on the Finnish market. The United States looks forward to continuing to work with Finland to address these and other issues.
Greece
Greece remains on the Watch List in 2014. U.S. concerns continue with respect to several IPR protection and enforcement issues in Greece. The United States encourages Greece to continue its efforts to implement the 2009 IPR Action Plan, which identifies many of these priority issues. Greece should fully implement legislation and regulations that provide administrative fines for software infringement. Greece should also take steps to ensure that it has effective legal mechanisms to address piracy over the Internet, including by implementing existing measures that allow civil actions by rights holders concerning piracy over the Internet, as well as by providing ISPs with clear incentives to cooperate with rights holders in removing unauthorized content. The lack of adequate governmental resources to combat piracy over the Internet has exacerbated this growing problem. In addition, Greece should expand on its enforcement efforts to address the continuing widespread availability of pirated and counterfeit goods. The United States also continues to encourage Greece to address key challenges facing IPR enforcement in the Greek judicial system, including significant delays and few infringement convictions. Greece has made progress, however, in a few key areas. There has been positive development in trademark protection particularly by passing a new trademark law which established the Illegal Trade Coordination Center (SYKAP). Moreover, national police, customs, and financial police also conducted investigations which resulted in seizures of counterfeit and pirated goods. In particular, rights holders have experienced excellent cooperation with the Tax Police in ​addressing enterprise end-user software piracy. The United States looks forward to continuing to work with Greece to address these and other issues.
Guatemala
Guatemala remains on the Watch List in 2014. While a number of problems remain outstanding, the United States applauds the Government of Guatemala's willingness to consider U.S. perspectives and concerns as Guatemala amended its laws and regulations relating to protections for geographical indications. Administrative authorities in Guatemala recently issued rulings on applications to register geographical indications (GIs) that appear sound and well-reasoned for compound GI names, but U.S. exporters remain concerned that rulings on single-name GIs, particularly related to dairy products, may prohibit new marketing opportunities for those products in Guatemala. On another positive note, enforcement activity increased in 2013 as compared to 2012, although it remained relatively ineffective given the scale of IPR infringement in Guatemala. Pirated and counterfeit goods continue to be widely available in Guatemala, and enforcement efforts are hampered by limited resources and the need for better coordination among all enforcement agencies. Trademark squatting is a significant concern, as administrative remedies are inadequate and relief through the courts is slow and expensive. Government use of unlicensed software is another problem that remains largely unaddressed. While the United States was encouraged by the 2011 enactment of legislation to strengthen penalties against the production and distribution of counterfeit medicines, and some enforcement efforts were initiated very recently, the United States is not aware of any successful prosecutions under the law. The United States urges Guatemala to engage with private industry and other interested parties regarding the protection and enforcement of intellectual property rights for pharmaceutical products and related legislative initiatives. The United States encourages Guatemala to sustain and further increase its enforcement efforts against the manufacture of pirated and counterfeit goods, and to take steps to improve the operation of its judicial system. The United States looks forward to continuing to work with Guatemala to address these and other matters.
Jamaica
Jamaica remains on the Watch List in 2014. The United States continues to encourage Jamaica to pass the long-awaited Patent and Designs Act. In the area of copyright, Jamaica is one of several Caribbean countries with deficiencies related to protection and enforcement. (See Section I). For several years, Jamaica has been identified by rights holders as one of the region's most problematic markets with respect to the unlicensed and uncompensated cable-casting and broadcasting of copyrighted music. Jamaica has taken steps to ensure its regulatory agencies are monitoring broadcasting entities and has pledged an open door policy to rights holders to discuss their specific IP-related concerns. However, Jamaica maintains a statutory licensing regime for the retransmission of copyrighted television programming but has not consistently enforced the payment of statutory royalties to rights holders. The United States looks forward to continuing to work with Jamaica to address these and other issues.
​Kuwait
Although Kuwait remains on the Watch List, the United States will conduct an Out-of-Cycle Review (OCR) in September 2014 to determine whether to elevate Kuwait to the Priority Watch List. The review is prompted both by Kuwait's failure for more than 14 years to draft and pass amendments to its copyright law to meet international standards, and the recent sharp decline in enforcement actions against copyright and trademark infringement. If Kuwait does not introduce to the National Assembly legislation which will result in a copyright law that is consistent with international standards and does not resume enforcement against copyright and trademark infringement by the time of the OCR, Kuwait will be moved to the Priority Watch List. The United States notes that the Kuwait Customs IPR Office has not halted its IP enforcement efforts, and commends the work by that office. The United States remains willing to work with Kuwait on these important issues.
Lebanon
Lebanon remains on the Watch List in 2014. The United States continues to encourage Lebanon to make progress on pending IPR legislative reforms, including amendments to Lebanon's patent and copyright laws and efforts to accede to the WIPO Internet treaties. The United States encourages the Parliament to approve several additional IPR treaties that have been forwarded by the Cabinet, including the Paris Convention for the Protection of Industrial Property, the Berne Convention for the Protection of Literary and Artistic Works, the Singapore Treaty on the Law of Trademarks, and the Patent Cooperation Treaty. Additionally, the United States encourages Lebanon to provide its Cyber Crime and Intellectual Property Rights Bureau (CCIPRB) with ex officio enforcement authority as well as to provide all of its enforcement authorities with adequate resources to carry out their enforcement functions. The United States looks forward to continuing to work with Lebanon to address these and other issues.
Mexico
Mexico remains on the Watch List in 2014. Positive developments in Mexico in 2013 included entry into force of the Madrid Protocol, implementation of amendments to the copyright law that allow rights holders to seek damages in civil courts before an administrative infringement decision is issued or becomes final, and progress in the destruction of seized illegal goods, although overall seizure numbers have declined. However, serious concerns remain, particularly with respect to the widespread availability of pirated and counterfeit goods in Mexico, including at the Notorious Markets Tepito and San Juan de Dios, and also increased Internet piracy due in part to higher broadband penetration. Although coordination has been increasing, criminal enforcement suffers from inefficient coordination among federal and sub-federal officials, as well as a lack of resources. In addition, to combat high levels of IPR infringement, Mexico needs to devote additional resources, bring more IPR-related prosecutions, and impose deterrent penalties against infringers. The United States continues to urge Mexico to provide its customs officials with ex officio authority and to enact legislation to strengthen its copyright regime, including by fully implementing the WIPO Internet Treaties and providing stronger protection ​against the unauthorized camcording of motion pictures in theaters. Prior to 2011, Mexican customs authorities and the Attorney General's Office worked jointly to intercept and prosecute transshipments of counterfeit and pirated goods. Following a shift in policy, however, Mexican authorities now only take action against transshipments of suspected infringing goods if there is evidence of "intent for commercial gain" in Mexican territory, which is very difficult to prove. The United States strongly urges Mexico to revert to the previous policy that allowed for the interception of potentially dangerous counterfeit trademark goods in transit to the United States and other countries. The United States looks forward to continuing to work with Mexico to address these and other issues, including through the TPP negotiations.
Paraguay
Paraguay remains on the Watch List in 2014. In addition, the United States continues to monitor Paraguay under Section 306. The Government of Paraguay has taken positive steps toward strengthening IPR, particularly since President Cartes took office in August 2013. On October 10, 2013, President Cartes signed the implementing regulation (Decree 460) for Law 4798 of 2012 that created the National Directorate of Intellectual Property (DINAPI). DINAPI is now the Paraguayan government authority responsible for the issuance and protection of copyrights, trademarks, patents, industrial designs, and geographical indications. Additionally, the law authorizes DINAPI's enforcement arm, the General Enforcement Directorate, to conduct administrative investigations and initiate proceedings at customs checkpoints and businesses. Decree 460 also mandates the creation of a National IPR Policy, which has yet to be drafted. In December 2013, DINAPI granted pharmaceutical patents to two U.S. companies, the first patents reportedly granted since 2005. DINAPI has also undertaken outreach to the public, signed inter-institutional cooperative agreements to improve IPR protection and enforcement, and has stepped up enforcement operations, including at the border. The United States looks forward to working constructively with Paraguay to address enforcement and other challenges, and to conclude negotiations re-launched in March 2014 on a bilateral IPR Memorandum of Understanding (MOU). Upon successful conclusion of the MOU, USTR will initiate an Out-of-Cycle Review to remove Paraguay from the Watch List.
Peru
Peru remains on the Watch List in 2014. The United States remains concerned about the widespread availability of counterfeit and pirated products in Peru. The United States urges Peru to devote additional resources for IPR enforcement, improve coordination among enforcement agencies, enhance its border controls, and strengthen its judicial system. The United States encourages Peru to coordinate enforcement and pursue prosecutions under the law that criminalizes the sale of counterfeit medicines. In addition, the United States urges Peru to take steps to implement its obligations under the United States-Peru Trade Promotion Agreement regarding the prevention of government use of unlicensed software, and likewise urges steps to implement obligations with respect to protections against piracy over the Internet, which continues to be a growing problem. Peru also needs to clarify its protections for biotechnologically-derived pharmaceutical products. The United States looks forward to ​continuing to work with Peru to address these and other issues, including through the TPP negotiations.
Romania
Romania remains on the Watch List in 2014. Despite positive instances of collaboration between the Romanian government and stakeholders, systemic concerns remain with respect to IPR protection and enforcement in that market. The United States encourages Romania to prioritize IPR protection and enforcement and urges Romania to devote the necessary resources and training for authorities to effectively address the continuing problems of piracy and counterfeiting. In 2013, for example, the number of enforcement actions taken dropped significantly when compared to 2012. Additionally, the General Prosecutor's IPR coordination department lacks sufficient staff. Romania should also take steps to address concerns over judicial delays and a lack of deterrent-level sentencing. Piracy over the Internet remains a serious concern, and more enforcement efforts are needed to address the problem. While some concerns persist, Romania has taken some positive steps. For example, cooperation between law enforcement, prosecutors, and IP-based industry groups continues to be close and effective at the working level. Notably, the GPO IPR Department also drafted guidelines for conducting Internet piracy investigations, and issued new procedures for prosecuting IPR crimes, which came into force on January 1, 2014. Notably, these procedures have resulted in positive enforcement actions against online piracy and counterfeiting. The United States looks forward to continuing to work with Romania to address these and other issues.
Tajikistan
Tajikistan remains on the Watch List in 2014. The United States urges Tajikistan to implement fully amendments of its Customs Code to provide ex officio authority to its customs and criminal enforcement officials, as discussed in connection with Tajikistan's WTO accession. The United States continues to recommend that Tajikistan increase prosecutions of criminal IPR infringement, and address optical disc piracy as well as reports of government use of unlicensed software. The United States looks forward to continuing to work with Tajikistan to increase its enforcement capacity in general, and to advance Tajikistan's implementation of commitments made as part of Tajikistan's WTO accession process.
Trinidad and Tobago
Trinidad and Tobago remains on the Watch List in 2014. The United States continues to urge the Government of Trinidad and Tobago to enforce the copyright provisions of its cable license agreements against cable operators who refuse to negotiate with the Copyright Music Organization of Trinidad and Tobago ("COTT"), the local performing rights organization, for compensation for public performance of music, including for music written by American composers. Particularly troubling is the situation with local cable operator FLOW. A court in 2011 found that FLOW is required to obtain a public performance license from and pay all applicable fees to COTT. However, nearly three years later, judicial authorities have not ​completed the appeal hearing nor assessed royalties owed to COTT. Furthermore, notwithstanding this decision, the local cable operator has failed to obtain the required public performance license, in violation of its cable license agreement with the government. The United States urges the Government of Trinidad and Tobago to take all necessary actions to ensure that the terms of such licenses be fulfilled or that those licenses be terminated. The United States also urges the Government of Trinidad and Tobago to address optical media piracy and other forms of IPR infringement. These issues affect not only American artists but Caribbean artists as well. The United States looks forward to continuing to work with Trinidad and Tobago to address these and other issues.
Turkey
Turkey remains on the Watch List in 2014. U.S. rights holders continue to raise serious concerns regarding the export from, and transshipment through, Turkey of counterfeit and pirated products. In particular, industry has expressed concern about the manufacture of counterfeited luxury goods, digital media, and textiles. Software piracy is also a growing problem. Serial code crackers and key generators used to gain unlawful access to software are commonly available, and in some cases, computers sold at retail stores are preloaded with illegal software. Legislative proposals intended to improve copyright and industrial property protections have not yet been finalized and passed. Adequate, transparent, and effective enforcement of IPR remains a significant challenge in Turkey, including due to obstacles posed by judicial delays, rarity of deterrent-level penalties, and the fact that the Turkish National Police lack ex officio authority. However, the United States congratulates Turkey on several successful enforcement initiatives resulting in the prosecution of individuals selling counterfeit medicines online and the seizure of printing presses and materials used to counterfeit pharmaceutical packaging, as well as the seizure of pirated books, counterfeited food products, and counterfeited cancer treatments. In addition, the United States notes that the Turkish National Police, Turkish Patent Institute, and Ministry of Culture and Tourism, as well as other agencies in the Turkish government, participated in several training, coordination, and public education initiatives, and the United States looks forward to seeing this productive cooperation between Turkey, WIPO, the United States, INTERPOL, and others continue. The United States looks forward to working with Turkey on these and other issues.
Turkmenistan
Turkmenistan remains on the Watch List in 2014. In 2012, Turkmenistan adopted a Law on Copyright and Allied Rights and amended its Civil Code to enhance IPR protection. However, Turkmenistan reportedly has yet to provide for effective administrative, civil or criminal procedures or penalties for enforcement of these rights. The United States urges Turkmenistan to provide for such enforcement procedures, including but not limited to ex officio authority for its customs officials. In addition, the United States continues to strongly encourage Turkmenistan to join the Berne Convention on the Protection of Literary and Artistic Works and the Convention for the Protection of Producers of Phonograms Against Unauthorized ​Duplication of their Phonographs (Geneva Phonograms Convention). The United States looks forward to continuing to work with Turkmenistan on these and other issues.
Uzbekistan
Uzbekistan remains on the Watch List in 2014. The United States congratulates Uzbekistan on the long-awaited passage of legislation that resulted in withdrawal of Uzbekistan's reservation to Article 18 of the Berne Convention for the Protection of Literary and Artistic Works, which relates to the protection of works created before 2005. However, the Uzbekistani Parliament should immediately take several legislative steps to address longstanding deficiencies in IPR protection. Specifically, it should: (1) approve Uzbekistan joining the Convention for the Protection of Producers of Phonograms Against Unauthorized Duplication of their Phonographs (Geneva Phonograms Convention); (2) approve Uzbekistan's accession to the WIPO Copyright Treaty and WIPO Performances and Phonograms Treaty (WIPO Internet Treaties); and (3) take legislative action to provide adequate copyright protection for foreign sound recordings. Additionally, Uzbekistan should provide additional resources to the Agency for Intellectual Property and other enforcement agencies as well as ex officio authority to initiate investigations and enforcement actions, including at the border. Uzbekistan also lacks deterrent-level penalties for IPR infringement. The United States will continue to engage with Uzbekistan on these IPR matters.
Vietnam
Vietnam remains on the Watch List in 2014. Although Vietnam took certain steps to improve its regulatory framework in 2012 and 2013 by passing decrees and issuing circulars to strengthen copyright protection and enforcement, significant areas of concern remain. Piracy and sales of counterfeit goods over the Internet are a growing concern, and counterfeit goods also remain widely available in physical markets. In addition, book piracy, software piracy (including on government computer systems), and cable and satellite signal theft continue to be widespread. Although Vietnam took further steps to improve public awareness efforts, Vietnam has made little progress in advancing enforcement actions. Enforcement agencies continue to have capacity constraints, due in part to a lack of resources and IPR expertise, and the lack of coordination among the agencies with enforcement jurisdiction is a further complicating factor. Vietnam should clarify its system for protecting against the unfair commercial use, as well as unauthorized disclosure, of undisclosed test or other data generated to obtain marketing approval for pharmaceutical products. While Vietnam has broad laws criminalizing IPR crimes, the government has yet to draft the implementing guidelines that are necessary for law enforcement agencies and the courts to levy deterrent criminal penalties against IPR violators. The United States looks forward to continuing to work with Vietnam to address these and other issues, including in the TPP negotiations.