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April 30, 1996


Washington, D.C.


Copyright Losses in China exceed $2.3 billion in 1995 Ambassador Barshefsky Announces Four New WTO Cases to Add to TRIPS Case Against Japan, Turkey, Greece and Indonesia on Priority Watch List for Enforcement Failures

Washington -- The International Intellectual Property Alliance (IIPA) today commended the Administration and the U.S. Trade Representative for continuing to press the Peoples' Republic of China to keep its commitments under the February 1995 U.S.-China Intellectual Property Rights Agreement.  USTR today designated China as a Priority Foreign Country under the Special 301 provisions of U.S. trade law, calling on China to stop production and export of all pirated products, and to provide market access to all U.S. copyright-based industries.  IIPA also lauded USTR for taking aggressive steps against inadequate intellectual property protection by commencing dispute settlement proceedings against trading partners that have not implemented their commitments under the World Trade Organization agreement.

IIPA President Eric H. Smith, said, "China remains the copyright industries' number one priority in 1996.  China has failed to date to carry out its promises to halt the massive production and export of pirate music CDs, video CDs and CD-ROMs containing U.S. entertainment and business software and text-based multimedia product.  U.S. losses due to copyright piracy in China, resulting from both export and pirate production in all media and sales within China grew to $2.32 billion in 1995.  Levels of piracy run from 50% to 99% in all categories of copyrighted material.  We applaud the Administration's continuing efforts, led by Acting USTR Charlene Barshefsky, to enforce the landmark 1995 U.S.-China IPR Agreement.  Unless China makes dramatic improvements in the next few weeks,  particularly by shutting down production and export from the infamous CD plants in Southern China, USTR should commence enforcement proceedings, including the sanctions process.  The Chinese promises in the 1995 IPR agreement must be redeemed; the credibility of two great trading nations is at stake."

Smith also praised USTR for maintaining bilateral pressure on U.S. trading partners by naming fifty-four of them to Special 301 lists, and for using this process to initiate multilateral dispute settlement proceedings under the new World Trade Organization TRIPS (Trade-Related Aspects of Intellectual Property Rights) Agreement.  "Both Special 301 and the WTO TRIPS Agreement are essential weapons in the fight against the theft of U.S. copyrighted material around the world.  We are gratified by USTR's decision to make appropriate use of both these tools. 

"Copyright laws have very definitely improved over this past decade," he added.  "What is most needed now, as in China, is improved enforcement.  Our economy continues to lose an estimated $18 to $20 billion annually to worldwide copyright  piracy.  As USTR has recognized, the TRIPS enforcement provisions must become an increasingly important part of the U.S. arsenal of trade tools in reducing these losses and opening up foreign markets.  Bilateral tools, like Special 301, are especially important in countries that are not yet members of the WTO, like China and Russia.  Both bilateral and multilateral attention must be brought to bear on many WTO members, including developed countries whose TRIPS obligations are now in effect.  Both Greece and Italy are examples of WTO members that must dramatically improve copyright enforcement if they are to come into compliance with their TRIPS obligations.  Germany must allow ex parte civil search orders if it is to avoid TRIPS scrutiny and a possible TRIPS dispute settlement case." 

"The IIPA is working with the Administration to evaluate compliance with TRIPS in the copyright and enforcement area," Smith added, "and we are particularly pleased that USTR is hard at work on accelerating TRIPS compliance by those developing countries that are eligible to take advantage of a four year transition period to bring their regime into compliance with TRIPS.  We again commend the Administration for commencing the first TRIPS case against Japan in February for failure to protect pre-1971 sound recordings.  USTR will be taking a case against Turkey for a discriminatory box office tax which will benefit the U.S. motion picture industry.  Turkey is a continuing problem for U.S. companies because of high levels of piracy and poor enforcement.  While IIPA is disappointed that it was not named as a Priority Foreign Country by USTR, a clear message must be sent that further delay in improving its protection will not be tolerated."  Three other new cases involving patent issues were also announced today.

Eight Countries on the Priority Watch List

Eight countries were named to the Priority Watch List this year -- Argentina, the European Union, Greece, India, Indonesia, Japan, Korea, and TurkeyIndonesia has been elevated to this list this year because of its failure, despite past promises, to take enforcement actions against major software and book pirates.  Greece's TV piracy continues virtually unabated despite passage of a broadcast law last year.  Its entire enforcement regime calls into question its compliance with its TRIPS obligations.  Japan and Korea continue to fall short in efforts to combat end-user piracy of business software.  

Twenty-six Countries on the Watch List

Ambassador Barshefsky named 26 countries to this year's Watch List -- Australia, Bahrain, Brazil, Canada, Chile, Colombia, Costa Rica, Ecuador, Egypt, El Salvador, Guatemala, Italy, Kuwait, Oman, Pakistan, Paraguay, Peru, Philippines, Poland, Romania, Russia, Saudi Arabia, Singapore, Thailand, United Arab Emirates, and Venezuela

Smith noted the failure of Russia to make progress over the last year and IIPA's concern that its Watch List placement sends entirely the wrong message.  "Russia adopted a world class copyright law in 1993, but this advance has had little commercial impact, given its failure to criminalize piracy.  No country has succeeded in rooting out piracy without criminal enforcement.  Russia must be convinced that this is an urgent matter between our two countries and that, following the upcoming election, Russia will be expected to pass a criminal penalty bill, afford protection to pre-1995 sound recordings and pre-1973 books, movies and music, and begin aggressive enforcement."

Paraguay has emerged as a major producer and importer/exporter of pirate product, including sound recordings and entertainment software and Chinese-origin pirate CDs, CD-ROMs and videogame cartridges.  The Watch List designation does not accurately reflect the seriousness of the problem in Paraguay and IIPA will press strenuously for an escalation of its 301 status if it does not take immediate action to curtail its massive trade in piratical copyrighted materials.

Concerns over enforcement and the lack of deterrent penalties for infringers persist in El Salvador, Italy, Poland, Saudi Arabia, Thailand and VenezuelaItaly is a particular concern where high losses remain in the video and audio area and in the area of commercial photocopying of entire textbooks.  Pressure needs to be kept on countries where enforcement activities have only recently begun (e.g., El Salvador) or appear to slack off absent direct pressure and attention from the U.S. government (e.g., Saudi Arabia and Thailand).

Nineteen Countries on Special Mention List

Nineteen countries were specially mentioned for continuing or impending IPR problems -- Bolivia, Bulgaria, Cyprus, Dominican Republic, Germany, Honduras, Hong Kong, Ireland, Israel, Jordan, Lebanon, Mexico, Nicaragua, Panama, Portugal, Qatar, South Africa, Taiwan, and Vietnam

Smith commented on the countries of particular concern to IIPA members.  "Mexico ranks with China and Russia as among the copyright industries' most important priorities.  Piracy levels are over 50% in every area; losses were over $285 million in 1995 excluding losses due to piracy of business software.  IIPA plans to review Mexico's enforcement improvements this fall to determine whether or not a NAFTA complaint is warranted."

Smith added, "Bulgaria remains an export center for pirate CDs.  By the time of its September out-of-cycle review, Bulgaria must meet its commitment to end pirate production by its CD plants through the effective monitoring of its recently adopted title verification scheme.  Germany must allow ex parte civil search orders if it is to avoid TRIPS scrutiny and a possible TRIPS dispute settlement case.  Hong Kong must increase the intensity of its enforcement to deal with exports from mainland China and commence the imposition of deterrent penalties on pirates at all levels.  Taiwan deserves recognition for improvements made, but must step up efforts to stamp out piracy links with the Chinese mainland, including trade in pirated videogame software imbedded in semiconductor chips for use in videogame cartridges.  Vietnam has the opportunity to invite significant U.S. investment by entering into a bilateral copyright agreement."

Twelve Countries Attract Out-of-Cycle Reviews

Out-of-cycle reviews have been scheduled with twelve countries in order to maintain pressure in these particular cases.  Review is scheduled for July 1996 for El Salvador, in September 1996 for Bolivia, Bulgaria, Greece and South Africa; for October 1996 for Hong Kong, Philippines, Saudi Arabia, Taiwan and Thailand; and for December 1996 for RussiaItaly's review has not yet been scheduled.  "These reviews can be a powerful tool to ensure progress," Smith noted.  "The 1995 reviews were not as effective as they should have been in resolving problems in the countries involved.  Visits of senior USTR officials to each country are critical in conveying the seriousness of these reviews.  We look forward to better use of this mechanism by USTR in 1996."

Countries listed on the Priority Watch List, Watch List and Special Mention list are subject to increased bilateral scrutiny but are not subject to immediate trade sanctions under the 1974 Trade Act.  In contrast, countries identified as Priority Foreign Countries under Special 301 become subject, after 30 days, to a Section 301 action with a negotiation timetable of six months (which can be extended, if necessary, an additional three months).  For example, the Special 301 investigation initiated in May 1994 against the People's Republic of China, was terminated by USTR on February 26, 1995 when the PRC entered into an agreement on IPR enforcement and market access, and thus avoided trade sanctions.

The IIPA represents more than 1,350 U. S. companies producing and distributing works protected by copyright laws throughout the world:  all types of computer software including business software and entertainment software (such as videogame CDs and cartridges, personal computer CDs and multimedia products);  motion pictures, television programs and home videocassettes; music, records, CDs and audiocassettes; and textbooks, tradebooks, reference and professional publications and journals (in both electronic and print media). 

In 1993, the core copyright industries contributed $238.6 billion in value added to the U.S. economy, or approximately 3.74% of the Gross Domestic Product (GSP), and the total copyright industries accounted for $362.5 billion in value added, or approximately 5.69% of GDP (in real 1993 dollars).  According to a February 1995 report prepared for IIPA by Economists, Inc. entitled Copyright Industries in the U.S. Economy:  1977-1993, the core copyright industries grew at more than twice the growth rate of the economy as whole between 1991 and 1993 (5.6% vs. 2.7%).  Employment in the core copyright industries grew at some four times the employment growth in the economy as a whole between 1988 and 1993 (2.56% vs. 0.74%).  Over 5.7 million workers were employed by the total copyright industries, about 4.8% of the U.S. work force, in 1993.  The core copyright industries contributed an estimated $45.8 billion in foreign sales to the U.S. economy in 1993, approximately an 11.7% gain over the $41.0 billion contributed in 1992.