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Monday, May 07, 2012

Keeping an Eye on International IP Rights

More than ever before, protecting intellectual property is a global undertaking. So, how are other nations faring in this endeavor that is so critical to entrepreneurs, small business and their employees, and the U.S. economy in general?

On April 30, the Office of the United States Trade Representative (USTR) released its annual "Special 301" Report. That publication examines how effective our trading partners are in protecting and enforcing IP rights (IPR).

In a statement, U.S Trade Representative Ron Kirk noted, "This year's Special 301 Report is more significant than ever in light of recent U.S. government data showing that IP-intensive industries support as many as 40 million American jobs and up to 60 percent of U.S. exports. When trading partners don't protect IPR, they threaten those critical jobs and exports.

The report looked at 77 countries, and 13 are placed on the Priority Watch List. That list includes the nations that "present the most significant concerns regarding insufficient IPR protection or enforcement, or otherwise limited market access for persons relying on IPR protection."

The 13 Priority Watch List nations are: Algeria, Argentina, Canada, Chile, China, India, Indonesia, Israel, Pakistan, Russia, Thailand, Ukraine, and Venezuela.

The two names that particularly jump out are Canada and China, since they rank first and second in terms of U.S. trading partners. For example, in 2011, total goods trade (exports and imports) between the U.S. and Canada came in at $597 billion and between the U.S. and China, it registered $503 billion.

It's not a surprise, of course, that China is on the Priority Watch List, given their ongoing struggles with enforcing intellectual property rights. While noting some improvements by China, the Special 301 Report, in part, stated: "A wide spectrum of U.S. rights holders reports serious obstacles to effective protection and enforcement of all forms of IPR in China, including patents, trademarks, copyrights, trade secrets, and protection of pharmaceutical test data. Compounding these obstacles is the troubling direction that China s policies in the IPR area have taken recently. These policies include China s efforts to link eligibility for government preferences to the national origin of the IPR in products. In addition, many companies are concerned that Chinese government agencies are inappropriately using market access and investment approvals as a means to compel foreign firms to license or sell their IPR to domestic Chinese entities. Further, for many industries, sales of IP-intensive goods and services in China remain disproportionately low when compared to sales in similar markets that provide stronger environments for IPR protection and more open market access. These concerns, coupled with the size of China both as a consumer marketplace as well as a globally significant producer of a wide array of products, mean that China's protection and enforcement of IPR must remain key priorities for U.S. trade policy."

That's a daunting and troublesome list, to say the least. China remains a land laden with opportunity, along with tremendous IP risks.

But Canada? Why is our neighbor to the north on the list?

The issue largely is about copyright protections. As noted in the Special 301 Report: "Canada remains on the Priority Watch List in 2012, subject to review if Canada enacts long- awaited copyright legislation. The Government of Canada has given priority to that legislation. The United States welcomes that prioritization and looks forward to studying the legislation once it is finalized, and will consider, among other things, whether it fully implements the WIPO Internet Treaties, and whether it fully addresses the challenges of piracy over the Internet."

It's important to keep in mind, though, that while both are on the Priority Watch List, the difference between China and Canada on protecting intellectual property is like night and day. Consider, for example, that on the "2012 Index of Economic Freedom," published by the Heritage Foundation and The Wall Street Journal, Canada ranked second best on the globe in terms of protecting property (both real and intellectual) rights, while China came in 153rd.

Most nations, including the U.S., have gaps in protecting intellectual property, and therefore, need to make improvements that are important to innovation, investment and economic growth. It s just that some nations, like China, have a heck of a lot more to do when compared to other countries like, for example, Canada.


Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His new book is "Chuck" vs. the Business World: Business Tips on TV.

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