# Special 301 Report/2013/Executive Summary

EXECUTIVE SUMMARY
The "Special 301" Report is the result of an annual review of the state of intellectual property rights (IPR) protection and enforcement in trading partners around world, which the Office of the United States Trade Representative (USTR) conducts pursuant to Section 182 of the Trade Act of 1974, as amended by the Omnibus Trade and Competitiveness Act of 1988 and the Uruguay Round Agreements Act.
This Report reflects the Administration's continued resolve to encourage and maintain adequate and effective IPR protection and enforcement worldwide. It identifies a wide range of concerns, including the continued deterioration in IPR protection, enforcement, and market access for persons relying on IPR in Ukraine; the growing problem of misappropriation of trade secrets in China and elsewhere; troubling "indigenous innovation" policies that may unfairly disadvantage U.S. rights holders in China; the continuing challenges of copyright piracy over the Internet in countries such as Brazil, Italy, and Russia; and other ongoing, systemic IPR enforcement issues presented in many trading partners around the world.
USTR looks forward to working closely with the governments of the trading partners that are identified in this year's Special 301 Report, to address both emerging and continuing concerns, and to continue to build on the positive results that many of these governments have achieved.
Public Engagement
USTR continued its enhanced approach to public engagement activities in this year's Special 301 process. These activities are designed to help facilitate sound, well-balanced assessments of IPR protection and enforcement efforts of particular trading partners, and to help ensure that Special 301 decisions are based on a robust understanding of the complicated IPR issues that various trading partners may encounter.
USTR requested written submissions from the public through a notice published in the Federal Register on December 31, 2012. This year's notice yielded 41 comments from interested parties, and 17 submissions from trading partners. The submissions that USTR received were made available to the public online at www.regulations.gov, docket number USTR-2012-0022. In addition, on February 20, 2013, USTR conducted a public hearing that allowed interested persons to testify before the interagency Special 301 subcommittee about issues relevant to the review. The hearing featured testimony from 13 witnesses, including representatives of foreign governments, industry, and non-governmental organizations. A transcript of the hearing is available at www.ustr.gov.
​Country Placement
The Special 301 designations and actions announced in this Report are the result of deliberations among all relevant agencies within the U.S. Government, informed by extensive consultation with affected stakeholders, foreign governments, the U.S. Congress, and other interested parties.
USTR, together with the Special 301 subcommittee of the Trade Policy Staff Committee, works to make a balanced assessment of U.S. trading partners' IPR protection and enforcement, as well as related market access issues, in accordance with the statutory criteria set out by Congress (see Annex 1).
This assessment is necessarily conducted on a case-by-case basis, taking into account diverse factors such as a trading partner's level of development, its international obligations and commitments, the concerns of rights holders and other interested parties, and the trade and investment policies of the United States. It is informed by the various cross-cutting issues and trends identified below in Section I – Developments in Intellectual Property Rights Protection and Enforcement. Each assessment is based upon the specific facts and circumstances that shape IPR protection and enforcement regimes in a particular trading partner.
In the year ahead, USTR will continue its bilateral engagement with the governments of the trading partners that are discussed in this Report. In preparation for and in the course of those interactions, USTR will:
* Engage with U.S. stakeholders, the U.S. Congress, and other interested parties to ensure that the U.S. Government's position is well-informed by the full range of views on the pertinent issues;
* Conduct extensive discussions with individual trading partners regarding their respective IPR regimes;
* Encourage those trading partners to engage fully, and with the greatest degree of transparency, with the range of stakeholders on IPR matters; and
* Identify, where possible, appropriate ways in which the U.S. Government can be of assistance.
USTR will conduct these discussions in a manner that both advances the policy goals of the United States and respects the importance of meaningful policy dialogue with U.S. trading partners. Additionally, USTR will continue to work closely with other U.S. Government agencies to ensure consistency of U.S. trade policy objectives with other Administration policies.
2013 Special 301 List
The 2013 Special 301 review process examined IPR protection and enforcement in 95 trading partners. Following extensive research and analysis, USTR has listed 41 trading partners below as follows:
Priority Foreign Country: Ukraine.
Priority Watch List: Algeria, Argentina, Chile, China, India, Indonesia, Pakistan, Russia, Thailand, Venezuela.
Watch List: Barbados, Belarus, Bolivia, Brazil, Bulgaria, Canada, Colombia, Costa Rica, Dominican Republic, Ecuador, Egypt, Finland, Greece, Guatemala, Israel, Italy, Jamaica, Kuwait, Lebanon, Mexico, Paraguay, Peru, Philippines, Romania, Tajikistan, Trinidad and Tobago, Turkey, Turkmenistan, Uzbekistan, Vietnam.
Priority Foreign Country Designation
In this year's Special 301 Report, USTR designates Ukraine a Priority Foreign Country (PFC), marking the first time in seven years that a country is listed in that category. The PFC designation is reserved by statute for countries with the most egregious IPR-related acts, policies and practices with the greatest adverse impact on relevant U.S. products, and that are not entering into good faith negotiations or making significant progress in negotiations to provide adequate and effective IPR protection. While the three specific grounds for Ukraine's designation as PFC are set out below, in general, the 2013 Special 301 review found Ukraine distinct from other trading partners both in its persistent failure to meet its commitments to improve IPR protection, including commitments in an Action Plan negotiated with the United States in 2010, and in the degree of deterioration in IPR protection, enforcement, and market access for persons relying on IPR in Ukraine. Ukraine's actions or inactions are causing significant damage to these industries reliant on those IPR in Ukraine's market, and in other markets as well.
Within 30 days from the date of this designation, the USTR will decide whether to initiate an investigation under section 301 of the Trade Act of 1974 based on the grounds identified in this report as the basis for Ukraine's designation as a PFC. If USTR initiates an investigation, USTR will request consultations with the Government of Ukraine and seek to resolve the issues that led to Ukraine's designation as a PFC.
When Ukraine was designated a PFC in the past, it failed to address the grounds for its designation during the following investigation. As a result, Ukraine lost its eligibility for benefits under the Generalized System of Preferences (GSP). Once Ukraine addressed the issues that led to its designation as a PFC, its eligibility for GSP benefits was reinstated.
Ukraine's designation as a PFC in this report is solely based on the IPR-related concerns identified below as the grounds for the designation, and not on any other aspect of Ukraine's international or domestic actions or policies. The Government of Ukraine has publicly noted that the Special 301 process is limited to IPR trade concerns.
​While Ukraine's broader intellectual property environment has several flaws, as discussed in previous Special 301 Reports, the specific grounds for the U.S. Trade Representative's designation of Ukraine as a PFC are: (1) the unfair, nontransparent administration of the system for collecting societies, which are responsible for collecting and distributing royalties to U.S. and other rights holders; (2) widespread (and admitted) use of illegal software by Ukrainian government agencies; and (3) failure to implement an effective means to combat the widespread online infringement of copyright and related rights in Ukraine, including the lack of transparent and predictable provisions on intermediary liability and liability for third parties that facilitate piracy, limitations on such liability for Internet Service Providers (ISPs), and enforcement of takedown notices for infringing online content.
Out-of-Cycle Reviews
An Out-of-Cycle Review (OCR) is a tool that USTR uses to encourage progress on IPR issues of concern. It provides an opportunity for heightened engagement with trading partners to address and remedy such issues. Successful resolution of specific IPR issues of concern can lead to a change in a trading partner's status on a Special 301 list outside of the typical time frame for the annual Special 301 Report. Although Spain is not listed in the 2013 Special 301 Report, USTR will conduct an OCR of Spain focusing in particular on Spain's concrete steps to combat copyright piracy over the Internet. USTR will also conduct an OCR of El Salvador, which remains unlisted, to monitor progress on IPR protection and enforcement, in particular with respect to the implementation of new legislation on pharmaceuticals and with respect to enforcement efforts, among other concerns. Several trading partners have requested that USTR conduct OCRs based on their projections for improvements in IPR protection and enforcement; USTR may conduct additional OCRs in consultation with a trading partner as circumstances warrant.
Out-of-Cycle Review of Notorious Markets
In 2010, USTR began publishing the Notorious Markets List as an OCR separately from the annual Special 301 Report. The Notorious Markets List identifies selected markets, including online markets, that are reportedly engaged in piracy and counterfeiting, according to information submitted to USTR in response to a request for comments. USTR requested such comments on August 14, 2012, and published the 2012 OCR of Notorious Markets on December 13, 2012. USTR plans to conduct an OCR on notorious markets in the fall of 2013.
Format of the Special 301 Report
The Special 301 Report is divided into the following two main sections and two Annexes:
* Section I: Developments in Intellectual Property Rights Protection and Enforcement discusses broad global trends and issues in IPR protection and enforcement that USTR works to address on a daily basis.
* Section II: Country Reports includes descriptions of issues of concern with respect to particular trading partners.
* Annex 1 describes the statutory background of the Special 301 Report.
* Annex 2 provides information about parties to the World Intellectual Property Organization (WIPO) Performances and Phonograms Treaty (WPPT) and the WIPO Copyright Treaty (WCT) (collectively, the WIPO Internet Treaties).