On April 25, 2019, the Office of the U.S. Trade Representative (USTR) issued its 2019 Special 301 Report that provides an annual review of the protection and enforcement of intellectual property (IP) rights, including Section 301 proceedings, by the United States’ trading partners. It focuses on developments in 2018 and early 2019 while citing reports and studies conducted over the last few years. The report provides an opportunity to hold foreign countries accountable and identifies the laws, policies, and practices that fail to provide adequate and effective IP protection and enforcement for U.S. inventors, creators, brands, manufacturers, and service providers. This weigh-in from IP-intensive U.S. industries helps shape the administration’s priorities as it works with trading partners. In the annual report, USTR divides the countries into three different categories: Priority Foreign Countries (PFC), Priority Watch List, and Watch List.
Below is a more detailed overview of USTR’s review of China given the intense focus on China throughout the course of the Trump administration. We will follow up with another alert on how the administration addresses IP protection and enforcement of Americans’ IP rights and other structural changes in the anticipated upcoming trade deal with China.
The Special 301 Report highlights (pg. 40) the key areas where China recently enacted or reformed broad trade policies but fell short to fully address the United States’ concerns and enforce their own regulations. These policies include trade secrets, the manufacturing and exporting of counterfeit goods, e-commerce piracy and counterfeiting, and sound patent law reforms. In the report, USTR discusses its continued pressure on China regarding the manufacturing, pharmaceutical, and e-commerce industries by means of bilateral dialogue and enforcement tools.
The report states that despite China’s broad government reorganization efforts, the trading partner failed to make fundamental structural changes to:
- Strengthen IP protection and enforcement;
- Open China’s market to foreign investment;
- Allow the market a decisive role in allocating resources; and
- Refrain from government interference in private sector technology transfer decisions.
USTR also explains how China has not shown significant progress in addressing their trademark issues for manufacturers, despite a number of announcements for reforms in 2017 by China’s State Administration for Industry and Commerce. In a 2019 report (pg. 42 of the report) analyzing 2016 data, researchers found that China, together with Hong Kong, was the source of $322 billion in fake exports, around 63.4 percent of the global total.
China remains on the Priority Watch List and is subject to continuing Section 306 monitoring.
Some of the highlights from the overall report also include:
- USTR included 36 trading partners in its report but did not identify any Priority Foreign Country. The 11 countries listed on the Priority Watch List are Algeria, Argentina, Chile, China, India, Indonesia, Kuwait, Russia, Saudi Arabia, Ukraine, and Venezuela.
- Canada and Colombia were moved from the Priority Watch List to the Watch List. USTR recognized that Canada has taken important steps toward improved IP protections as part of the U.S.-Mexico-Canada Agreement. The country has also moved forward on tougher enforcement measures against counterfeits, national treatment, an inspection of goods in transit, transparency with respect to new geographical indications, and copyright terms.
- The report added Saudi Arabia to the Priority Watch List, primarily due to a lack of IP protection for innovative pharmaceutical products, and failure to act against the satellite and online piracy service BeoutQ.
USTR requests written submissions from the public through a notice published in the Federal Register. The deadline for public comments for consideration in the next Special 301 Report and the next public hearing date are typically announced at the end of each year, with the report usually released the following April.