Counterfeiting, Piracy Continue to Thrive Globally

U.S. government, associations, companies remain on the offensive to combat intellectual property theft.

Two recent events underscore the continuing shortfalls of intellectual property (IP) protection around the globe. The first was the release by the Office of the U.S. Trade Representative (USTR) of its annual "Special 301 Report," which provides an annual review of IP enforcement and protection in 78 countries. While the report notes positive developments on IP rights protection and enforcement in 2007, it also makes very clear that piracy and counterfeiting remain pervasive problems.

"Counterfeiting has evolved in recent years from a localized industry concentrated on copying high-end designer goods to a sophisticated global business involving the mass production and sale of a vast array of fake goods," the report states. "Not only is there greater diversification in the types of goods that are being counterfeited, but industry reports a growing trend in the production of labels and components for these fake products. Exploiting free trade zones, counterfeiters are establishing a global trade in these items, shipping them separately to be assembled and distributed in another country."

The report places 45 countries on either a Watch List or a Priority Watch List, meaning that IP rights problems exist in those countries. A single country -- Paraguay -- was placed on a Section 306 monitoring list, which entails the USTR monitoring its compliance with bilateral IP agreements.

Meanwhile, the Semiconductor Industry Association (SIA) has launched a directory of authorized distributors to combat what it has identified as a "growing problem" of counterfeit components entering the supply chain. The directory is part of a larger anticounterfeiting campaign that involves working with authorities at borders to seize counterfeit goods. "The recent seizure of more than 360,000 counterfeit integrated circuits and computer network components in a joint effort of customs agencies of the United States and the European Union is evidence of the size of international traffic in illicit electronic components," states George Scalise, president of the SIA.

Who's On the Priority Watch List?

Countries on the USTR's Priority Watch List do not provide an adequate level of intellectual property rights protection or enforcement, or market access for persons relying on IP protection. Countries on the Priority Watch List are the focus of increased bilateral attention concerning problem areas, the USTR says.

Argentina
Chile
China
India
Israel
Pakistan
Russia
Thailand
Venezuela

The goal of the directory is to make it easy for buyers to find manufacturers' authorized distributors. "One sure way to protect against using counterfeit or substandard components is to purchase them from the original manufacturer or an authorized dealership," points out Curt Gerrish, CEO of Rochester Electronics, which published the directory with the SIA's support. Gerrish says the directory will be updated regularly on a dedicated Web site.

China and Russia remain troublesome with respect to IP protection, despite evidence of some improvement, says the USTR in its annual review. For example, the report cites estimates by U.S. copyright industries that 85% to 95% of all of their members' copyrighted materials sold in China were pirated. In addition, some 80% of IP rights-infringing product seizures at the U.S. border in 2007 were of Chinese origin. "Inadequate IP rights enforcement is a key factor contributing to these shortcomings, with high criminal thresholds as well as difficulties in initiating or transferring cases for criminal prosecution resulting in limited deterrence," states the 2008 Special 301 Report.

In Russia, large-scale production of IP-infringing optical media is a significant problem.

"We continue to work with our Chinese and Russian colleagues to ensure that they deliver on their commitments to improve intellectual property protection and enforcement," notes Ambassador Susan C. Schwab, U.S. Trade Representative.

On the bright side, the USTR notes improvements among several nations with respect to intellectual property. For example:

  • Belize is being removed from the Watch List due to improvements in IP rights enforcement efforts.
  • Egypt is being moved from the Priority Watch List to the Watch List due to better pharmaceutical IP rights protection.
  • Lithuania is being removed from the Watch List due to improvements in enforcement and passage of IP rights legislation.

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