statement of
Stephen M. Pinkos
Deputy Under Secretary of Commerce for Intellectual Property
and
Deputy Director of the United States Patent and Trademark Office
before the
Committee on Small Business
Subcommittee on Rural Enterprise, Agriculture and Technology
Subcommittee
and the Tax, Finance and Exports
United States House of Representatives
“Does China Enact
Barriers to Fair Trade?”
May 26, 2005
Introduction
Chairman Graves, Chairman Bradley, Ranking Member Barrow,
Ranking Member Millender-McDonald, and Members of the Subcommittees:
Thank you for this opportunity to appear before you to
discuss international intellectual property (IP) piracy and counterfeiting
problems and the Department of Commerce’s role in protecting IP abroad. Secretary Gutierrez is keenly aware of the
increasing significance of IP protection for American businesses and innovators
and has made combating piracy and counterfeiting a top priority for the entire
Department. As Deputy Under Secretary of
Commerce for Intellectual Property and Deputy Director of the United States
Patent and Trademark Office (USPTO), I am dedicated to marshalling U.S.
government efforts to reduce the toll that IP theft takes on American IP
owners. I am very appreciative of the
Subcommittees’ interest in addressing additional ways to protect U.S. IP
owners’ assets, and I commend you for holding today’s hearing on China.
Scope of Global IP Piracy and Counterfeiting Problem
Increasingly, both the United States and our trading
partners are relying on IP to drive economic growth. This is because competitive success in a
market economy depends more and more on the IP assets held by an institution --
from the skills of its employees to the results of its latest research. IP-based businesses, such as the software and
entertainment industries, now represent the largest single sector of the U.S.
economy.
According to the
International Intellectual Property Alliance, U.S. copyright industries
continue to lead the U.S.
economy in their contributions to job growth, gross domestic product (GDP), and
foreign sales/exports. Between 1977 and
2001, the U.S. copyright
industries' share of the GDP grew at an annual rate more than twice as fast as
the rest of the U.S.
economy. In 2002, the U.S.
"core" copyright industries' activities accounted for approximately 6
percent of the U.S. GDP ($626.6 billion). In
2002, the U.S.
copyright industries achieved estimated foreign sales and exports of $89
billion, leading all major industry sectors, including motor vehicles
(equipment and parts), aircraft and aircraft parts, and the agricultural
sector.
Unfortunately, the economic benefits of capitalizing on
intellectual property rights (IPR) have captured the attention of pirates,
organized crime, and terrorists. The
global criminal nature of IP piracy has effects in other areas as well. As former U.S. Attorney General John
Ashcroft reported: "In addition to threatening our economic and personal
well being, intellectual property crime is a lucrative venture for organized
criminal enterprises. And as law enforcement has moved to cut off the
traditional means of fund-raising by terrorists, the immense profit margins
from intellectual property crimes risk becoming a potential source for
terrorist financing."
USPTO
and DOC Efforts to Combat Problem
Given these threats to U.S. economic interests and our
national security, the USPTO and our colleagues in the Department of Commerce
are working hard to curb IP crime and strengthen IP enforcement in every corner
of the globe. Indeed, former Secretary
Evans heavily emphasized this issue, and Secretary Gutierrez has indicated it
is a top priority for the entire Department.
Because American IP owners compete in a global marketplace, we must
expand our efforts to promote IP protection internationally. We must make sure that American IP owners
have sufficient knowledge and legal tools to fight piracy and
counterfeiting. We also must provide
foreign countries technical assistance on drafting and implementing effective
IP laws and promoting the effective enforcement of IP rights.
American Inventors Protection Act of 1999
The passage of the American Inventors Protection Act of 1999
(AIPA) (P.L. 106-113) set the stage for the USPTO to advise the President,
through the Secretary of Commerce, and all Federal agencies, on national and
international IP policy issues, including IP protection in other
countries. USPTO is also authorized by
the AIPA to provide guidance, conduct programs and studies, and otherwise
interact with foreign IP offices and international intergovernmental
organizations on matters involving the protection of intellectual property.
Our established Offices of International Relations and
Enforcement carry out the functions authorized by the AIPA. These include (1) working with Congress to
implement international IP treaties; (2) providing technical assistance to
foreign governments that are looking to develop or improve their IP laws and
systems; (3) training foreign IP officials on IP enforcement; (4) advising the
Department of State and the Office of the U.S. Trade Representative (USTR) on
drafting/reviewing of IP sections in bilateral investment treaties and trade
agreements; (5) advising USTR on intellectual property issues in the World
Trade Organization (WTO); and (6) working with USTR and industry on the annual
review of IP protection and enforcement under the Special 301 provisions of the
Trade Act of 1974. The USPTO also
represents the United States
in United Nation bodies, such as the World Intellectual Property Organization
(WIPO), to help set the international standards for IP protection and
enforcement.
National Intellectual Property Law Enforcement
Coordination Council (NIPLECC)
The USPTO serves as the co-chair of the National
Intellectual Property Law Enforcement Coordination Council (NIPLECC), which is
tasked with coordinating domestic and international intellectual property law
enforcement. NIPLECC was launched in
1999 to ensure the effective and efficient enforcement of intellectual property
in the United States
and worldwide. NIPLECC’s coordination
activities ensure that government enforcement efforts are consensus-based and
non-duplicative. NIPLECC has developed a comprehensive database that includes all recent
IP law enforcement training provided by the U.S. government and many
associations to developing and least developed nations. It is also developing legislative suggestions
to improve domestic IP laws related to enforcement. We look forward to continuing our efforts in
NIPLECC.
Strategy Targeting Organized Piracy (STOP)
Further, the Strategy Targeting Organized Piracy (STOP)
Initiative, which has been developed over the last year, is the most
comprehensive U.S. government-wide initiative ever advanced to demolish the
criminal networks that traffic in fakes, stop trade in pirated and counterfeit
goods at America's borders, block bogus goods around the world, and help small
businesses secure and enforce their rights in overseas markets. I will discuss this important initiative in
more detail later.
Enforcement Training and Technical
Assistance
The USPTO provides a
variety of IP enforcement training and technical assistance activities. These programs are designed to foster respect
for IP, encourage governmental and right holders’ efforts to combat
infringement, and promote best practices in the enforcement of IPR. Our technical assistance and capacity
building initiatives grew out of a desire to promote IP protection and assist
developing countries in meeting their obligations under the WTO’s Trade-Related
Aspects of Intellectual Property Rights (TRIPs) Agreement. In addition, we have responded to an
increasing number of requests by foreign governments for such training and
technical assistance activities. Our
efforts have had positive results in some countries, measured by decreasing
levels of IP piracy and counterfeiting, and the implementation of stronger
legal protections in many of the countries in which we have provided such
training. Still, much work remains,
including in China,
where IP theft has not decreased.
Today, our efforts are
aimed at: (1) assisting developing and least developed countries to meet
international standards in the protection and enforcement of IP; and (2)
assisting administrative, judicial, and law enforcement officials in addressing
their enforcement issues.
Trade-Related
Aspects of Intellectual Property Rights Agreement (TRIPs)
At the conclusion of
the Uruguay Round in 1994, the resulting TRIPs Agreement presented WTO members
with new obligations and challenges. The
TRIPs Agreement sets minimum standards of protection for the various forms of
IP and requires WTO members to provide for “enforcement procedures ... that
permit effective action against any act of infringement of intellectual
property rights.” The TRIPs Agreement
includes detailed provisions on civil, criminal and border enforcement measures
designed to provide the owners of IP with the tools to protect and enforce
their rights. Today, Developing
Countries obligations’ under the TRIPs Agreement have fully entered into
force. Least Developed Countries have
until 2006 to comply with the bulk of the provisions, including the enforcement
obligations.
Over the last several
years, the USPTO has assisted countries around the world in establishing
adequate enforcement mechanisms to meet their obligations under the TRIPs
Agreement. In bilateral negotiations, we
work closely with USTR to seek assurances from our trading partners of even
higher levels of IP enforcement than those set forth in the TRIPs
Agreement. We provide technical advice
through the annual Special 301 process, the GSP review, the TRIPs Council
review of implementing enforcement legislation, and in the negotiation of free
trade agreements (FTAs).
Our approach to the
on-going FTA negotiations has been to build upon the TRIPs Agreement. In other words, our negotiating position is
that these trade agreements should follow a “TRIPs Plus” format by, among other
things, expanding the minimum standards set out in the TRIPs Agreement. For example, by incorporating provisions of
the WIPO Copyright Treaty and WIPO Performances and Phonograms Treaty, the FTA
updates copyright protections and enforcement for the digital environment. In our advisory capacity, we will continue to
work with the Department of State and USTR to conclude FTAs that reflect the
level of protection and enforcement of IP rights in the United States.
Intellectual Property Issues and USPTO Approach in China
Due to the rapid increases in piracy and counterfeiting in China, we recognize that U.S. companies
face enormous IPR protection and enforcement challenges in these countries and
that their losses are mounting daily. At
the same time, the pressures of the competitive global marketplace, criminal
elements, and protectionist and non-tariff barriers, make these challenges
increasingly more sophisticated. That is
why the USPTO’s team of experts has developed comprehensive work-plans to
address the rising IP problems facing these countries. While the USPTO does not have the lead on
trade policy issues, which is the mandate of USTR, we have devoted significant
resources to making progress in improving China’s IPR regimes for our
industries, right holders and this Administration.
The Bush Administration understands that IP is a vital
component of our nation’s economy and that this Administration’s focus on
combating global piracy and counterfeiting has produced a solid track record of
real results. The STOP Initiative, which
I mentioned earlier and will discuss in more detail later, is a continuation of
these efforts by providing additional tools to protect American workers from
counterfeiters and pirates who are robbing billions of dollars from the U.S.
economy.
China
The U.S.
has long been concerned about IP protection dating back to the founding of our
country. For example, Gilbert
Stuart’s Athenaeum portrait of George Washington was replicated without
authorization by a Philadelphia
merchant, who was later sued for copyright infringement. Our first engagement with China on IP
dates back to the early 20th century. In early 1903, at the end of the Qing
dynasty, the U.S. government
entered into the first bilateral agreement between China
and the United States
to protect IP. Our first commercial
agreements in the 1970s with the People’s Republic of China contemplated that China improve
its IP system. Our current Ambassador to
China,
Clark Randt, was involved in some of these early negotiations.
Unfortunately, problems persist and our concerns about IP
enforcement in China
continue to grow. Despite China’s
membership in the WTO and its requirement to comply with the TRIPs Agreement,
as well as a series of bilateral commitments made over the past 10 or more
years, the lack of effective IP enforcement in China is a major problem for
U.S. business interests, costing billions of dollars in lost revenue and
perhaps tens of thousands of U.S. jobs.
While China
has done a generally good job of creating laws to comply with its WTO
commitments, IP enforcement problems remain pervasive. These problems run the gamut from rampant
piracy of movies and business software to counterfeiting of consumer goods,
electrical equipment, automotive parts, and pharmaceuticals.
I was very pleased that Secretary Gutierrez stated the following
during his confirmation hearing with respect to intellectual property rights:
“We actually lived through this as a food company, ironically, where we found
that our brand was actually being copied and used in some
markets and obviously without any authorization. One of the great assets that we have as a
country is our brands, our technology. I
think this is a matter to focus on. I
think it is a big issue.” Secretary
Gutierrez also cited IP protection as a key issue in U.S.
trade ties with China,
and he has reiterated his commitment to addressing this issue to me.
IP Problem
in China
Estimates from the computer software and automotive parts
industries are illustrative of the scope of the problem. The software industry estimates that more than 90 percent of all software installed on computers in China in 2003
was pirated. The automotive parts industries estimate that
counterfeit automotive parts production costs the industry billions of dollars
in lost sales. China is a
leader in counterfeit goods in this industry.
In the automotive arena, most counterfeiting involves parts
that need to be replaced frequently, such as oil filters, headlamps, batteries,
brake pads, fan belts, windshields, and spark plugs. For example, DaimlerChrysler, BMW, Audi,
Volvo, Mitsubishi, and Toyota report that even
though a factory in Guangdong
Province has been raided
three times in a two-and-a-half-year period, it has been allowed to continue
making windshields stamped with their brand names for sale in the world
market. One industry group estimates
that legitimate automotive companies could hire 210,000 more employees if the
counterfeit auto parts trade is eradicated.
According to the World Health Organization (WHO), 10 percent
of the medicines in the world are counterfeit, with China being one of the main centers
of counterfeit production. Rudolph
Giuliani offered the following testimony before a Senate Committee in June of
last year:
“An August 30, 2002, Washington Post story
cites the Shenzhen Evening News in reporting that an estimated 192,000 people
died in China in 2001 because of counterfeit drugs. Another news story reported that as much as
50 percent of China’s
drug supply is counterfeit (Investor’s Business Daily dated October 20, 2003).”
While no definitive statistics exist on total U.S. job
losses attributable to IP piracy and counterfeiting in China, there is no doubt piracy and counterfeiting
deprive the government of billions of dollars of much needed tax revenue, cost thousands of jobs,
and injure the domestic software industries.
China’s Enforcement Issues
The Chinese IPR enforcement environment today is complicated
by a variety of different Chinese and foreign interests, including Chinese
industrial policies, trade policies, the interests of foreign investors, and
the interests of Chinese domestic enterprises.
In this environment, our right holders increasingly look to adequate
enforcement of criminal IPR laws in implementation of China’s WTO commitments as a key to reducing counterfeiting
and piracy rates in China. China, it should be noted, does not
lack for quantitative enforcement. Each
year, tens of thousands of enforcement actions are undertaken. However, these actions are typically pursued
by administrative agencies, which impose non-deterrent penalties.
This
Administration has been pressing China to impose prison sentences
and/or stiffer fines on violators of IPR since fines and other penalties
imposed are too modest and provide little or no deterrence. In December 2004, two branches of China’s
government – the Supreme People’s Court and Supreme People’s Procuratorate
(prosecutor) issued a new “Judicial Interpretation” for criminal IPR
infringements. The new Interpretation
expanded the scope of violations punishable by prison sentences by lowering the
value threshold necessary to initiate a prosecution, but on the enforcement
side took a significant step backwards with respect to violations committed by
repeat offenders. The new
Interpretation was also deficient in many other areas of concern to industry
and foreign governments, including, for example, coordination among China’s civil
and administrative systems as well as the relationship with other IP laws. Furthermore, the new Interpretation
complicated matters by allowing infringing goods to be valued based on their
street value, not their legitimate value, thus sanctioning declarations by the
infringer as a measure for determining whether or not Chinese valuation
thresholds were met dictating prosecution.
Equally disconcerting was that unfinished or offsite products were
exempt in assessing that value.
Many of the challenges that China encounters are at least
partially due to deficiencies in its own system, including extensive
corruption, local protectionism, and lack of interagency coordination. Some of the issues we have raised with
Chinese colleagues include: the use of
mandatory sentencing guidelines for IPR crimes; support for specialized IPR
courts which have greater independence from local financing and control;
establishing appropriate procedures for investigation, prosecution, and
conviction of IPR criminals; and effectively addressing trans-border IPR crime,
as well IP crime committed over the Internet.
It is important to recognize that there is a Chinese
domestic constituency also seeking enhanced IPR protection and enforcement, and
that pirates and counterfeiters do not necessarily discriminate against
Americans or just against Americans lacking political influence. As the economy grows, domestic interest in
IP, particularly in the more developed cities on China’s seaboard, is increasing
dramatically. China’s deficient IP protection and
enforcement hinders Chinese software engineers, inventors, and movie producers
who have to struggle with a severely deficient domestic market as their
principal source of income. Chinese IP
owners have become increasingly vocal proponents of stronger IP
protection. One indication that IPR is
attaining increased domestic importance is the number of trademark applications
received by the Chinese Trademark Office (CTO).
For the past two years, the CTO received more trademark applications
than any country in the world. The State
Intellectual Property Office is also growing rapidly and receives some of the
highest number of filings for patent applications worldwide.
Growing domestic interest in IP protection and enforcement
may be of small comfort to U.S.
industry when the impact of piracy and counterfeiting on U.S. industry
appears to be growing. U.S. Government
statistics show a worsening situation.
For example, USTR’s 2004 Special 301 Report states that during 2003, 66
percent of all of the IPR-infringing goods seized at the U.S. border came from China. Many industries also increasingly suspect
that the Chinese government, by restricting market access, is providing free
rein for counterfeiters, pirates, and criminals to exploit the void created by
the lack of legitimate products. Many U.S. companies
also complain of industrial policies that help create conditions for production
of infringing products. Counterfeit Viagra, for example, dominates the Chinese
market, while the legitimate product has been hampered by market access
restrictions. Pirated movies appear in
the Chinese market long before censors have approved the legitimate
product. Other high-tech companies
complain of standards setting, such as in wireless networking technology, which
limits introduction of legitimate products or mandates technology transfer.
USPTO’s
Efforts in China
Under the direction of this Administration, the USPTO has
been working extensively to reduce piracy and counterfeiting activity in China. First, we provide technical support to all
agencies of the U.S. Government that are addressing these issues, including
USTR, the Department of Commerce/International Trade Administration (ITA), the
U.S. Department of Justice, the Department of Homeland Security, and the State
Department.
The USPTO has an established team of experts on Chinese IP
matters, which includes IP attorneys with detailed knowledge and background on
patents, trademarks, copyrights, enforcement issues, and WTO/WIPO issues. Our cooperation with other U.S. government
agencies extends beyond the trade agenda to providing support on strategies and
to addressing transnational crime and transnational trade in counterfeit goods,
as well as other issues.
TRIPS review. For
example, we take an active role in the annual review of China’s TRIPs
commitments at the WTO, including primary responsibility for drafting many of
the TRIPs-related questions. Three USPTO
officials attended China’s
WTO review last year. We also actively participate in the APEC Intellectual
Property Experts Group, which plays a constructive role in developing regional
standards for IP, including cooperation on enforcement matters. Further IP initiatives in China supported
by the USPTO are described below.
IP attorney at U.S. embassy. For two summers, with the active support
of U.S. Ambassador Clark Randt, we stationed one of our IP enforcement
attorneys, who is fluent in Mandarin, in our embassy in Beijing to help with IP enforcement issues in
the region. Last fall, the USPTO was
proud to continue this support by detailing this individual as attaché to the
U.S. Embassy in Beijing
for a three-year appointment to continue our Government’s efforts to combat
piracy and counterfeiting. This is the
first time the USPTO has sent an official abroad for an extended period of time
to assist in improving IP protection in a specific country, which highlights
the seriousness of IP violations in China. Having an attaché stationed in China has enhanced the USPTO’s ability to work
with Chinese government officials to improve IP laws and enforcement procedures
in addition to assisting U.S.
businesses to better understand the challenges of protecting and enforcing
their IPR in China.
Meetings with Enforcement Officials and Other
Influences. One of the greatest
challenges in China
is ensuring that localities fully enforce national laws. To that end, the USPTO has held meetings with
numerous local copyright, trademark, judicial, police, and prosecutorial
enforcement officials throughout China to ensure that local
officials fully understand their international obligations. We have hosted numerous delegations at the
USPTO, with the objective of addressing this challenge. We have also worked with U.S. non-governmental organizations in support
of rule of law efforts and training programs, including a Temple
University program and Franklin Pierce
Law School’s
annual summer program on intellectual property law in Beijing for American and Chinese law
students.
Training. Recent efforts in China that we have supported
include: training on criminal IPR with
the support of the British Government and China’s Ministry of Public Security;
training on patent data protection and patent linkage with the State
Intellectual Property Office and State Food and Drug Administration; training
on “business methods patents” with the State Banking Regulatory Commission,
State Council Legislative Affairs Office and the Development Bank of China;
training with the World Customs Organization on border measures and criminal
IPR; participation in Chinese sponsored programs on IP protection in Shanghai
and on IPR strategies for multinational companies in Beijing; and a joint U.S.
Semiconductor Industry Association and Chinese Semiconductor Industry
Association training program on IPR in high tech industries, to name but a
few.
Bilateral meetings with trade groups. We have also participated in a range of
bilateral meetings and consultations with visiting U.S. trade associations such
as the Intellectual Property Owners, U.S. Information Technology Office,
Research and Development Pharmaceutical Association of China, Quality Brands Protection
Committee, American Bar Association, International Federation of Phonographic
Industries, Motion Pictures Association, Entertainment Software Association,
Business Software Association, Association of American Publishers, U.S. Chamber
of Commerce, to name just a few. We have
also worked with some of these organizations to host enforcement conferences in
such major cities as Beijing, Shanghai,
Guangzhou, Wuhan,
Nanjing, and Chengdu.
Both domestically and in Beijing,
we have provided briefings for visiting congressional and judicial delegations,
and we have provided training for State Department and Commerce Department
officials at our various consulates, including participation at a regional
training program in Hong Kong sponsored by the
Economic Bureau of the State Department.
Working with the Department of Commerce’s Technology Administration and
the International Intellectual Property Institute, we have provided technical
assistance on copyright protection in Dalian
and Shenzhen.
Public relations efforts. The USPTO continues to work through our own
office of public affairs and the public diplomacy offices of the Embassy and
consulates on providing an informed perspective on IP matters to the Chinese
public and Chinese decision makers.
Additionally, we are supporting State Department efforts to provide
informational materials on U.S. IP practices to the Chinese public. We have also had several meetings at Chinese
Universities. Under Secretary of
Commerce for Intellectual Property and Director Jon W. Dudas delivered a talk
at Qinghua University,
one of China’s
leading law and engineering institutions, on IP protection. In addition, my staff has delivered
presentations at Sichuan Normal University Law Faculty, Qinghua Law Faculty,
People’s University and other institutions, as well as appearing on several
television shows and being featured in newspaper articles.
Supporting Businesses and Working with Law
Enforcement in China
Apart from these advocacy and training efforts, we are
involved in developing practical strategies to support our businesses in
handling problems in China. We have worked extensively with the Commerce
Department on improving methods for handling business complaints involving
unfair IP practices in China
and have become involved with the STOP Initiative whereby we handle complaints
involving IP, many of which involve China. We have worked on two leading programs
associated with the U.S. Embassy involving IP: a “toolkit” on IP matters for U.S. businesses
on the Embassy’s website, and the “IPR Roundtable” that the Ambassador hosts
each year.
Meetings in China. We have held meetings at the Canton Trade
Fair to discuss IPR enforcement and complaints filed. We continue working with ITA, the American
Bar Association, and many other organizations to provide better assistance to U.S. small and
medium businesses. USPTO attorneys have
been meeting with other foreign missions and trade associations to exchange
ideas on innovative ways to promote better protection of IPR in China.
Training programs for American businesses. We have participated in training programs for
our business people in the United States,
to better enable them to forcefully address the IPR challenges they experience
in China
and, when necessary, bring well-founded complaints to our attention. Typically in conjunction with the Department
of Commerce, members of our China team have participated in programs in such
cities as: Cincinnati, Ohio; Grand
Rapids and Pontiac, Michigan; Charlotte, North Carolina; Miami, Florida;
Minneapolis, Minnesota; Wichita, Kansas; St. Louis, Missouri; New York City and
Long Island, New York; Waterbury, Connecticut; Boston, Massachusetts;
Providence, Rhode Island; Portsmouth, New Hampshire; Fresno, San Jose and San
Francisco, California; Salt Lake City, Utah; and Washington, D.C. A major focus of these efforts has been to
address problems of small and medium enterprises, although larger enterprises
have also benefited from participation in many of these programs as well.
Workshops about China. In addition to our work with the Department
of Commerce, our China team
is planning to roll out a series of intensive China
workshops and seminars in several
cities throughout the United
States in 2005-2006. The first of these seminars is planned for Detroit, Michigan,
in June. The program will provide companies with information about several
useful topics, ranging from an overview of the IP protection and enforcement
environment in China, specific information on how to file patent and trademark
applications in China, how to use China's administrative and judicial systems
to enforce IPR, and useful tips about how to locate and hire a local company to
investigate IP infringement in China.
Another activity, as part of our ongoing efforts to assist
U.S. businesses and IP owners in protecting their rights overseas, includes a
seminar on the Chinese criminal justice system for IP offenses that we held in
February of this year. The seminar
introduced the Chinese criminal justice system to U.S. industry, government agencies,
IP owners, and legal practitioners and included information on the recently
amended Judicial Interpretation so they may better understand the system and
use this information to their full advantage to combat counterfeiting and
piracy. We sponsored a follow up program
in April of this year.
Our China
team has supported a number of programs to advise our companies on how to file
a criminal IPR case in China. These programs have already been held in Guangzhou, Beijing, and
Hong Kong with an additional program planned for Shanghai.
In addition, we provide support to our own law enforcement authorities
where possible on IP criminal matters.
For example, we have supported the Joint Liaison Group on criminal
justice cooperation in its efforts to facilitate better criminal IPR
cooperation, and joined in training programs run by a number of different
government agencies on criminal IPR matters.
Our China team works
closely with the Customs Attaché and Legal Attaché at the U.S. embassy as
well as the Bureau of International Narcotics and Law Enforcement at the State
Department on these matters.
More
United States Government
Efforts in China. Like Secretary Gutierrez, former Secretary of
Commerce Evans believed in the strong enforcement of our trade laws and took
innovative and proactive measures to strengthen the enforcement and compliance
of our trade agreements. During his
tenure, he tasked Commerce agencies, such as USPTO and the new Investigations
and Compliance Unit within ITA’s Market Access and Compliance Group, to
coordinate their efforts to vigorously pursue allegations of IPR violations
wherever they occur, especially in China.
Delegations to China. In 2003, then-Commerce Secretary Evans led a
mission to China and
highlighted China’s
lack of IPR enforcement. The Secretary
met with high-ranking Chinese officials and reiterated a continuing concern --
that effective IPR protection requires that criminal penalties for IP theft and
fines are large enough to be a deterrent, rather than a business expense.
As a follow-up to the October 2003 trip, Under Secretary and
Director Jon W. Dudas led two delegations in 2004 for consultations with senior
officials at China's
patent, trademark, copyright, and other IP agencies. Our delegation also met with U.S. companies facing IP issues in China. The primary focus of these trips was to
further the Administration's goals of improving the IP environment for U.S. companies doing business in China, and
specifically of addressing widespread counterfeiting and piracy. We discussed several issues, including the
need for improved criminal, civil, and administrative enforcement, the need for
protecting copyrights over the Internet and China’s accession to the WIPO
Internet Treaties.
In January 2005, Under Secretary Dudas traveled to Beijing as part of a
second Evans-led delegation. He was
fortunate to be able to meet with Chinese Premier Wen Jiabao and Vice Premier
Wu Yi to discuss concerns over China's
enforcement of IPR of American businesses. Ambassador Randt also hosted the
third roundtable on Intellectual Property Rights, which was attended more than
250 government officials and business and industry representatives from the
USPTO, the European Union, Japan, and China's IP agencies. In addition to providing the luncheon
keynote address during the January roundtable, Under Secretary Dudas announced
the USPTO's new plans for IP technical assistance for Chinese IP–related
agencies. He was pleased that the
USPTO’s offers of cooperative assistance were well received, and we are in the
process of implementing these as well.
U.S.-China Joint Commission on Commerce and Trade (JCCT)
Working Group on IPR
In an effort to address problems in China, the U.S.
and China
created a “working group on IPR” that resulted from the April 2004 session of U.S.-China Joint Commission on Commerce and Trade. We are pleased that Under Secretary Dudas
co-chairs this working group with Deputy
U.S. Trade Representative Josette Shiner.
Through the JCCT and other avenues, the U.S. hopes to continue to work with closely with
China to improve the
situation for U.S.
rights holders. During the
April 2004 session of the JCCT, China
presented an action plan designed to address the piracy and counterfeiting
problems faced by U.S.
companies. Under the plan, China committed
to: (1) significantly reduce IPR
infringement levels; (2) issue a judicial interpretation for criminal
enforcement of IPR cases by end of year; (3) conduct nation-wide enforcement
campaigns; (4) ratify and implement the WIPO Internet Treaties as soon as
possible, and (5) agree to establish an IPR working group under the JCCT. In
line with the JCCT mandate, the working group will seek to ensure that China
significantly reduces IPR infringement to levels consistent with standards
required by WTO rules.
Challenges and Recommendations concerning China
While our trips to China have been well received, and
we are pleased to note a continuing and increasing awareness among Chinese
officials of the importance of IP protection and enforcement, we have not yet
seen significant progress on most of the key issues. These issues include enhanced criminal
enforcement, a deterrent administrative enforcement system, protecting
copyrights over the Internet, and stopping the export of counterfeit
goods. We are also interested in other
developments, such as China’s
efforts to develop an IPR Strategic Plan for development of its IP assets,
other industrial policy goals, legislative efforts to draft a Civil Code that
may include IPR, and general rule of law efforts that could significantly
affect the protection of IPR over the long run.
While we fully recognize that China needs to make drastic
improvements in its IPR system to ensure that our right holders are fairly
protected, we should not underestimate the steps that our businesses and
government can take to reduce the risks of piracy and counterfeiting. The USPTO will continue working with small
and medium-sized companies on how best to protect their valuable IP rights in China. One particular example is for companies to
register all their trademarks promptly in China and especially, their Chinese
language trademarks. Given the fast pace
of China’s economic
development and the huge volume of trademark applications in China,
companies should file for their marks early in their marketing cycle.
Globalization means that competitors can retrieve
information about products not yet introduced in their country from a U.S. company’s
web site. Counterfeiting and piracy also
originates from employees, agents, or distributors who have taken confidential
information to engage in a competing operation. China’s
practice regarding protection of trade secrets by former employees who have
signed non-compete agreements is different from the United States. We will continue to educate companies on how
best to protect their intellectual property rights.
It is especially important we encourage our industries to
work with us and the other U.S. agencies involved in improving China’s IP
protection and enforcement environment by: urging the fair and transparent
implementation of China’s IPR system; fully exploiting this system; providing
us with detailed information on its deficiencies in order to reduce future risks
of such activities; and supporting our bilateral and multilateral efforts to
reduce the impact of these problems.
The Global STOP Initiative
We are pleased to discuss with you the STOP Initiative, the
most comprehensive intergovernmental agency initiative ever advanced to smash
the criminal networks that traffic in fakes, stop trade in pirated and
counterfeit goods at America's borders, block bogus goods around the world, and
help small businesses secure and enforce their rights in overseas markets. There are several
important features of the STOP Initiative that I’ll mention:
Hotline and Website
First, the USPTO participates
heavily in this initiative by managing a hotline, 1-866-999-HALT, established by the Department
of Commerce to help business protect their IPR at home and overseas. The goal of the hotline is to empower U.S. business to secure and enforce their IPR by
providing them the information they need to secure their patents, copyright and
trademarks, and to enforce these rights here in the U.S. and abroad.
Callers receive
information from IP attorneys with regional expertise on how to secure patents,
trademarks, and copyrights, and on the enforcement of these rights. Businesses and innovators now have access to
a place to learn more about the risks of global piracy and counterfeiting and
how to protect their IP rights in both individual countries and in multiple
countries through international treaties.
In addition, we have established a link from our USPTO website to www.stopfakes.gov
on the Department of Commerce’s website, which provides in depth detail of the
STOP Initiative.
No Trade in Fakes
Program
The Department of
Commerce is in charge of another important component of the STOP Initiative,
the no-trade-in-fakes program that is being developed in cooperation with the
private sector. This is a voluntary,
industry-driven set of guidelines and a corporate compliance program that
participating companies will use to ensure their supply chains and retail
networks are free of counterfeit or pirated goods.
Increasing and Communicating Enforcement
The STOP Initiative will raise the stakes for international
IP thieves by more aggressively pursuing perpetrators of IP crimes and
dismantling criminal enterprises. STOP
also seeks to increase global awareness of the risks and consequences of IP
crimes through public awareness campaigns, and creating and operating a website
publicizing information about international criminal IP enforcement actions.
Building Coalitions
The ultimate success
of the STOP Initiative involves building coalitions with many of our
like-minded trading partners, such as Japan,
the United Kingdom, and France, who
have all recently launched similar initiatives.
We
are seeking to continue working with our partners in the G-8, Organization for
Economic Cooperation and Development (OECD) and the Asia-Pacific Economic
Cooperation (APEC) forum. Cooperation on
new initiatives to improve the global intellectual property environment is
essential to disrupting the operations of pirates and counterfeiters.
International Outreach
A delegation of U.S. officials from seven federal
agencies, including myself, recently kicked-off our international outreach
effort to promote STOP internationally.
Last month we visited various capitals in Asia
generating much interest and fruitful discussions. On each leg of the trip, U.S. officials
shared information on our efforts to combat the theft of inventions, brands and
ideas. This first leg abroad is advancing our commitment by enlisting our
trading partners in an aggressive, unified fight against intellectual property
theft. Outreach to Asia will be followed
by visits to other capitals later in the year, for example, next month
we plan on visiting Europe. We have tentatively planned that
countries receptive to cooperation on STOP will be invited to attend a meeting
in Washington, D.C.
(likely in the fall of 2005) designed to formalize their
participation and finalize a work plan.
Future STOP Activities
The USPTO has several future planned activities supporting
our initiatives under STOP. The first
involves our public outreach efforts. In
addition to our China-related workshops and seminars for 2005-2006, my staff will
also be embarking on an educational road show to various cities in the United States
to educate small- and medium-sized business on what IPR are, why they are
important, and how to protect and enforce these rights domestically and
internationally. The first of these workshops is planned for Salt Lake City on May 23 and 24, and already,
we have found an enormous amount of interest in the program. We will replicate
this program in other cities throughout several regions of the U.S. in the
coming months.
We continue to work in WIPO to seek to simplify, streamline,
and improve the cost efficiency of the trademark application process across
borders to provide more efficient and less burdensome systems for right
holders.
We will continue to work closely with the IP community, STOP
team, and you to promote a legislative agenda that is designed to meet the huge
challenge of combating piracy and counterfeiting. Tougher
enforcement of our international trade laws is necessary for the growth of our
economy and the creation of new jobs. In
order to fully implement the STOP Initiative, it may be necessary to reassess
current legislation.
Conclusion
Mr. Chairman, the requirements on the Department of Commerce
and USPTO’s expertise in the international arena have grown dramatically in the
last few years. These demands will
continue to increase in the next few years, along with our obligations to meet
our core patent and trademark examination functions.
As we look to the future, however, let me conclude on a positive
note. Although by all accounts
counterfeiting and piracy appear to be growth “industries,” there have been
some recent successes in attacking the problem.
Between 2001 and 2002, the software industry estimates that software
piracy in Indonesia
decreased from 89 percent to 68 percent.
In South Africa,
it fell from 63 percent to 36 percent.
The motion picture industry has reported a decrease in piracy levels in Qatar from 30
percent in 2001 to 15 percent in 2002.
In Bahrain,
there have been dramatic and systemic improvements in IP protection and
enforcement over the past few years.
These include the signing of numerous international IP conventions and
the virtual elimination of copyright piracy and counterfeiting in retail
establishments.
There is some reason for optimism. I remain hopeful that with the continued
support and partnership of the Subcommittee, we will be able to do even more to
provide American businesses and entrepreneurs with the IP knowledge and
protection they need. Clearly, in terms
of the economy and national security, much is at stake. That is why our dedicated team of experts
will continue to work tirelessly to protect American products all around the
globe.
Thank you very much.