U.S. Trade Rep Announces 'Special 301' Designations

(May 1, 1999) The U.S. Trade Representative announced on Friday afternoon, April 30, its annual "Special 301" designations, identifying foreign countries which fail to protect intellectual property rights.

The Trade Act of 1974 requires the U.S. Trade Representative (USTR) to identify annually foreign countries that deny adequate and effective protection of intellectual property rights or fair and equitable market access for U.S. persons that rely on intellectual property protection. In addition to making these "Special 301" designations, the USTR also announced its Super 301 and Title VII reports.

"All of these tools -- Super 301, Special 301, and Title VII -- enable us to enforce the commitments undertaken around the world to increase market access for U.S. goods and services," said Ambassador Charlene Barshefsky in the statement released by the Office of the USTR. "Taking action against those foreign government practices that conflict with existing international obligations enables the United States to open markets to U.S. exports consistent with current obligations and, at the same time, identify U.S. priorities for our future trade negotiations."

USTR Charlene Barshefsky

"This year's review emphasized three critically important issues: proper and timely implementation of the WTO TRIPS Agreement, cracking down on pirated production of "optical media" such as CDs, VCDs, DVDs, and CD-ROMs, and ensuring that government ministries only use authorized software," stated Ambassador Barshefsky in the annual review. "We have made significant progress on each of these issues over the past year, but the unacceptably high rate of piracy around the world of U.S. intellectual property requires on-going vigilance."

Robert Holleyman, President of the Business Software Alliance (BSA), stated in a press release that the "USTR's decision today in naming specific countries for inadequate protection and enforcement will help curb software theft and raise awareness of the seriousness of copyright infringement. U.S. trading partners should not be permitted to leave software piracy unchecked. Piracy drains the global economy of jobs, reduces government revenues and costs more than $11.4 billion in losses each year." (See, full text of Holleyman statement at bottom of page.)

The USTR's annual review designated Paraguay and China for "Section 306 monitoring" to ensure both countries comply with the commitments made to the United States under bilateral intellectual property agreements. It also announced placement of 16 countries on the "Priority Watch List": Israel, Ukraine, Macau, Argentina, Peru, Egypt, the European Union, Greece, India, Indonesia, Russia, Turkey, Italy, Dominican Republic, Guatemala, and Kuwait. In addition, it placed 37 countries on the "Watch List." Finally, out-of-cycle reviews will be conducted of Malaysia, Hong Kong, Israel, Kuwait, South Africa, Colombia, Poland, the Czech Republic, and Korea.

The USTR statement contained the following description of its Special 301 designations:

"As a result of this year's Special 301 review, Ambassador Barshefsky announced the following actions: initiating WTO dispute settlement procedures against Argentina, the EU, and Canada; scheduling a special out-of-cycle review in December 1999 of all developing countries' implementation of their obligations under the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement); monitoring China and Paraguay under Section 306 of the Trade Act of 1974, as amended; scheduling an out-of-cycle review of Malaysia in September 1999; placing 17 trading partners on the Special 301 Priority Watch List; and placing 37 trading partners on the Watch List."

The International Intellectual Property Alliance (IIPA) had recommended to the USTR in February that Israel be designated as a "Priority Foreign Country" under Special 301. The USTR did not do this. However, Israel was placed on the "priority watch list."

"We think that this is the appropriate designation for them," Anne Gavin of the BSA told Tech Law Journal. "We hope that this will be the kind of nudge that they need."

The IIPA had alleged in its February 16 filing with the USTR that "Israel is now the key locus of international optical media piracy, producing, importing and transshipping pirate product in quantities that dwarf its modest legitimate domestic demand. Israel's domestic market for sound recordings, video games and computer programs, once promising and profitable, are being overwhelmed by piracy."

The USTR announced seven dispute settlement cases, including two pertaining to patent protection in Canada and Argentina. The USTR statement contained the following descriptions of these actions:

"Canada - Patent Protection: The TRIPS Agreement requires that Canada provide a patent term of 20 years from the date of filing. It also requires that Canada extend such protection to all patents in existence on January 1, 1996. However, Canada provides a 20-year patent term only to those patents filed on or after October 1, 1989; earlier patents receive only 17 years of protection from the date that the patent was granted. The United States will request WTO consultations regarding this provision of Canadian law."

"Argentina - Patent Protection: The United States will request WTO consultations regarding Argentina's failure to comply with its obligation to provide exclusive marketing rights under the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement), and its diminution in the level of protection provided to undisclosed test data submitted for marketing approval for agricultural chemicals in Argentina."