On April 25, 2019, the Office of the U.S. Trade Representative (USTR) issued its 2019 “Special 301 Report” on inadequate protection and enforcement of intellectual property rights by the United States’ trading partners.  USTR has issued a Special 301 Report each year since 1989 pursuant to section 182 of the Trade Act of 1974.  The Special 301 Report reflects the culmination of a public comment and hearing process allowing all interested parties – domestic businesses and industries, civil society groups, trade associations, think tanks, and other stakeholders – to identify foreign countries and expose 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.  The Special 301 Report and process provides an important opportunity for IP-intensive U.S. industries to highlight adverse cross-border IP rights issues and help shape the Administration’s priorities as it engages with trading partners on IP and related market access issues.

Countries that are identified as falling short with respect to protection, enforcement, and market access for IP-intensive industries are listed in the Special 301 Report in one of three ways.  Countries with the most egregious acts, policies, or practices that have the greatest adverse impact on U.S. companies and products are listed Priority Foreign Countries (“PFC”).  PFCs are subject to investigation and potential trade sanctions such as tariffs, quotas, or other measures.  A country may not be listed as a PFC under the law if it is entering into good faith negotiations or making significant progress toward providing and enforcing IP rights.  Notably, USTR may designate a country as a PFC even if that country is in compliance with the World Trade Organization’s IP agreement – the Agreement on Trade-Related Aspects of Intellectual Property Rights, or the TRIPS Agreement.

Countries whose conduct does not warrant PFC designation may instead be placed on USTR’s Priority Watch List or Watch List.  USTR develops action plans and engages in bilateral discussions with countries on the Priority Watch List to resolve the problems identified (with the threat of designation as a PFC if the issues are not resolved).  Watch List countries, with significant but less serious IP protection and enforcement problems, also face the risk of being elevated to the Priority Watch List if improvements are not made over time.  USTR may also conduct Special 301 “out-of-cycle” reviews that allow for heightened engagement to address positive or negative developments in the bilateral negotiation process with a country.

USTR included 36 trading partners in its 2019 Special 301 Report, but did not identify any Priority Foreign Country.  Countries listed on the Priority Watch List are Algeria, Argentina, Chile, China, India, Indonesia, Kuwait, Russia, Saudi Arabia, Ukraine, and Venezuela.  The Watch List countries and a link to the full report can be found here.

There were several notable developments in this year’s report.  On a positive note, Canada and Colombia moved from the Priority Watch List to the Watch List.  USTR recognized the important steps taken by Canada toward improved IP protections as part of the U.S.-Mexico-Canada Agreement (“USMCA”), the terms of which address enforcement against counterfeits, inspection of goods in transit, transparency with respect to new geographical indications, national treatment, and copyright term (we previously addressed the IP provisions of the USMCA here).  USTR, however, remains concerned about Canada’s IP regime with respect to innovative pharmaceuticals and exceptions added to its copyright law.  Colombia has also made significant progress toward copyright reform, including the passage of legislation that included an extended protection term and stronger enforcement measures.  Colombia’s efforts were recognized in a 2018 out-of-cycle review that focused on Colombia’s implementation of certain provisions of the United States-Colombia Trade Promotion Agreement.

This year’s Special 301 Report also added Saudi Arabia to the Priority Watch List and Paraguay to the Watch List.  According to USTR, Saudi Arabia has failed to address long-standing and deteriorating IP concerns regarding the lack of IP and unfair commercial use protection for innovative pharmaceutical products and online piracy.  After a four-year break from being specifically identified in the report pursuant to a Memorandum of Understanding with the United States, Paraguay has returned to the Watch List.  USTR found that Paraguay has failed to meet key commitments made in the MOU, does not provide adequate or effective border enforcement against counterfeit and pirated goods, and, in fact, remains a “major transshipment point” for such goods.

The deadline for public comments for consideration in the next Special 301 Report and public hearing date are typically announced at the end of each year, with the report usually released the following April.