Intellectual property is a category of intangible rights that protect commercially valuable products of the human intellect, such as inventions; literary and artistic works; and symbols, names, images, and designs used in commerce. U.S. protection of intellectual property has a long history: Article 1 of the U.S. Constitution grants the Congress the power “to promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” Copyrights, patents, and trademarks are the most common forms of protective rights for intellectual property. Protection is granted by guaranteeing proprietors limited exclusive rights to whatever economic reward the market may provide for their creations and products. Ensuring the protection of IPR encourages the introduction of innovative products and creative works to the public. Intellectual property is an important component of the U.S. economy, and the United States is an acknowledged global leader in the creation of intellectual property. According to USTR, “Americans are the world’s leading innovators, and our ideas and intellectual property are a key ingredient to our competitiveness and prosperity.” However, industries estimate annual losses stemming from violations of intellectual property rights overseas are substantial. Further, counterfeiting of products such as pharmaceuticals and food items fuels public health and safety concerns. USTR’s Special 301 annual reports on the adequacy and effectiveness of intellectual property protection around the world demonstrate that, from a U.S. perspective, intellectual property protection is weak in developed as well as developing countries and that the willingness of countries to address intellectual property issues varies greatly. U.S. laws have been passed that address the need for strong intellectual property protection overseas and provide remedies to be applied against countries that do not provide adequate or effective protection. For example, the Omnibus Trade and Competitiveness Act of 1988 allows the U.S. government to impose trade sanctions against such countries. Eight federal agencies, the FBI, and the USPTO undertake the primary U.S. government activities to protect and enforce U.S. intellectual property rights overseas. These agencies are the Departments of Commerce, State, Justice, and Homeland Security; USTR; the Copyright Office; USAID; and USITC. The U.S. government also participates in international organizations that address intellectual property issues, such as the World Trade Organization (WTO), the World Intellectual Property Organization (WIPO), and the World Customs Organization (WCO). The efforts of multiple U.S. agencies to protect U.S. intellectual property overseas fall into three general categories—policy initiatives, training and technical assistance, and U.S. law enforcement actions. USTR leads most U.S. policy activities, in particular the Special 301 review of intellectual property protection abroad. Most agencies involved in efforts to protect U.S. IPR overseas conduct training and technical assistance activities. However, the number of agencies involved in U.S. law enforcement actions is more limited, and the nature of these activities differs from other U.S. government actions related to intellectual property protection. U.S. policy initiatives to increase intellectual property protection around the world are primarily led by USTR, in coordination with the Departments of State and Commerce, USPTO, and the Copyright Office, among other agencies. These efforts are wide ranging and include the annual Special 301 review of intellectual property protection abroad, use of trade preference programs for developing countries, negotiation of agreements that address intellectual property, and several other activities. A centerpiece of policy activities is the annual Special 301 process. “Special 301” refers to certain provisions of the Trade Act of 1974, as amended, that require USTR to annually identify foreign countries that deny adequate and effective protection of intellectual property rights or fair and equitable market access for U.S. persons who rely on intellectual property protection. USTR identifies these countries with substantial assistance from industry and U.S. agencies and publishes the results of its reviews in an annual report. Once a pool of such countries has been determined, the USTR, in coordination with numerous agencies, is required to decide which, if any, of these countries should be designated as a Priority Foreign Country (PFC). If a trading partner is identified as a PFC, USTR must decide within 30 days whether to initiate an investigation of those acts, policies, and practices that were the basis for identifying the country as a PFC. Such an investigation can lead to actions such as negotiating separate intellectual property understandings or agreements between the United States and the PFC or implementing trade sanctions by the U.S. government against the PFC if no satisfactory outcome is reached. In its annual Special 301 report, USTR also lists countries with notable but less serious intellectual property protection problems as, in order of decreasing severity, “Priority Watch List” countries and “Watch List” countries. Unlike PFCs, countries cited on these lists are not subject to automatic consideration for investigation. Between 1994 and 2004, the U.S. government designated three countries as PFCs—China, Paraguay, and Ukraine—as a result of intellectual property reviews (see table 1). China was initially designated as a PFC in 1994 owing to acute copyright piracy, trademark infringements, and poor enforcement. Paraguay was designated as a PFC in 1998 owing to high levels of piracy and counterfeiting resulting from an absence of effective enforcement, its status as a major point of transshipment for pirated or counterfeit products to other South American countries, and its inadequate IPR laws. The U.S. government negotiated separate bilateral intellectual property agreements with both countries to address these problems. These agreements are subject to annual monitoring, with progress cited in each year’s Special 301 report. Ukraine, where optical media piracy was prevalent, was designated a PFC in 2001. No mutual solution was found, and in January 2002, the U.S. government imposed trade sanctions in the form of prohibitive tariffs (100 percent) aimed at stopping $75 million worth of certain imports from Ukraine over time. These sanctions negatively affected Ukraine’s exports to the United States. U.S. data show that overall imports from Ukraine experienced a dramatic 70 percent decline from 2000 to 2003. U.S. trade data also show that U.S. imports of the items facing punitive tariffs (with one exception) declined by $57 million from 2000 to 2003. Since 2001, Ukraine has remained the sole PFC and the sanctions have remained in place. In early 2002, according to Department of State officials, Ukraine passed an optical disc licensing law—a key U.S. factor in originally designating Ukraine as a PFC. Further, the Ukrainian government reportedly closed plants that were pirating optical media products. However, the U.S. government remains concerned that the optical disc law is inadequate. Although it designated only three countries as PFCs between 1994 and 2004, the U.S. government has cited numerous countries—approximately 15 per year recently—on its Special 301 Priority Watch List. Of particular note, the European Union has been placed on this list every year since 1994, while India and Argentina have been on the list for 10 and 9 years, respectively, during that period. By virtue of membership in the WTO, the United States and other countries commit themselves not to take WTO-inconsistent unilateral action against possible trade violations involving IPR protections covered by the WTO but to instead seek recourse under the WTO’s dispute settlement system and its rules and procedures. This may impact any U.S. government decision regarding whether to retaliate against WTO members unilaterally with sanctions under the Special 301 process when those countries’ IPR problems are viewed as serious. U.S. IPR policy efforts also include use of the Generalized System of Preferences (GSP) and other trade preference programs administered by USTR. The GSP is a unilateral program intended to promote development through trade, rather than through traditional aid programs, by eliminating tariffs on certain imports from eligible developing countries. The GSP was originally authorized by the Trade Act of 1974; when it was reauthorized by the Trade and Tariff Act of 1984, new “country practice” eligibility criteria were added, including a requirement that beneficiary countries provide adequate and effective IPR protection. Petitions to withdraw GSP benefits from countries that do not meet this criterion can be filed as part of an annual GSP review and are typically filed by industry interests. Petitions are considered through an interagency process led by USTR, with input from the Departments of State and Commerce, among others. In administering the GSP program, USTR has led reviews of the IPR regimes of numerous countries and has removed benefits from some beneficiary countries because of IPR problems. Ukraine lost its GSP benefits in August 2001 (approximately 6 months before the imposition of sanctions that stemmed from Ukraine’s designation as a PFC under the Special 301 process) because of inadequate protection for optical media, and these benefits have not been reinstated. Adequate and effective IPR protection is required by other trade preference programs, including the Andean Trade Preference Act (ATPA), which provides benefits for Bolivia, Colombia, Ecuador, and Peru; the African Growth and Opportunity Act (AGOA); and the Caribbean Basin Initiative (CBI). USTR reviews IPR protection provided under these trade preference programs, and, according to USTR officials, GSP, which includes numerous developing countries, has been used more actively (in terms of reviews and actual removal of benefits) than ATPA, CBI, and AGOA. In fact, according to USTR officials, benefits have never been removed under ATPA or AGOA owing to IPR concerns. However, USTR officials emphasized that these programs and their provisions for intellectual property protection have been used effectively nevertheless.