The Special 301 Report 2016: 8-Russia, 10-Ukraine

The Special 301 Report 2016: 8-Russia, 10-Ukraine
The Special 301 Report (Report) is the result of an annual review of the state of intellectual property rights (IPR) protection and enforcement in U.S. trading partners around the world, which the Office of the United States Trade Representative (USTR) conducts pursuant to Section 182 of the Trade Act of 1974, as amended by the Omnibus Trade and Competitiveness Act of 1988, the Uruguay Round Agreements Act, and the Trade Facilitation and Trade Enforcement Act of 2015 (19 U.S.C. § 2242).

This Report reflects the Administration’s continued resolve to encourage and maintain adequate and effective IPR protection and enforcement worldwide. The Report identifies a wide range of concerns, including: (a) the deterioration in IPR protection and enforcement in a number of trading partners; (b) reported inadequacies in trade secret protection in China, India, and elsewhere; (c) troubling “indigenous innovation” policies that may unfairly disadvantage U.S. right holders in markets abroad; (d) the continuing challenges of online copyright piracy; (e) measures that impede market access for U.S. products embodying IPR and U.S. entities that rely upon IPR protection; and (f) other ongoing, systemic IPR enforcement issues in many trading partners around the world.

The Report serves a critical function by identifying opportunities and challenges facing U.S. innovative and creative industries in foreign markets and by promoting job creation, economic development, and many other benefits that effective IPR protection and enforcement support. The Report informs the public and our trading partners and seeks to be a positive catalyst for change. USTR looks forward to working closely with the governments of the trading partners that are identified in this year’s Report to address both emerging and continuing concerns, and to build on the positive results that many of these overnments have achieved.


Russia remains on the Priority Watch List in 2016 as a result of continued and significant challenges to IPR protection and enforcement, particularly in the areas of copyright infringement, trademark counterfeiting (with a notable increase in counterfeit branded seeds) and non-transparent collecting society procedures. In particular, the United States remains concerned over stakeholder reports that IPR enforcement continued to decline overall in 2015, following similar declines in the prior three years including a reduction in resources for enforcement personnel.

There are also reports that IPR is not a priority for government officials.

Copyright infringement is a persistent problem in Russia, including, but not limited to, online piracy. Although Russia’s antipiracy legislation continues to evolve, its efficacy and the possible need for further modifications remain uncertain. In one positive development, a Russian court shut down, which had been listed in the Notorious Markets List. However, Russia remains home to many other sites (such as vKontakte) that facilitate online piracy, damaging both the market for legitimate content in Russia as well as in other countries. Issuing injunctions against infringing websites does not address the root of the problem; Russia should be investigating and prosecuting the operators of such sites. The overall number of raids, criminal charges, and convictions have declined in recent years. The United States urges Russia to ensure that ongoing legislative and enforcement efforts will result in copyright enforcement mechanisms that are fair, effective, and transparent.

The lack of enforcement of trademarks has resulted in the continued problem of counterfeit goods in Russia. Stakeholders express concern that counterfeit goods continue to be manufactured, transshipped and sold in Russia, including counterfeit seeds, agricultural chemicals, electronics, information technology, auto parts, consumer goods, machinery, and other products.

The Russian Ministry of Agriculture estimated in 2015 that 10 to 20 percent of hybrid sunflower, rapeseed, and soybean seed used in Russia was counterfeit. The smuggling of Chinese-origin counterfeit products continued through Kazakhstan and the Kyrgyz Republic into Russia. While the United States applauds Russia’s development of an officially-approved methodology for testing allegedly counterfeit pharmaceuticals, counterfeit pharmaceuticals continue to be manufactured in Russia and made available through online pharmacies.
The United States is also concerned about Russia’s implementation of the commitments it made in the WTO Working Party Report related to the protection against unauthorized disclosure of, or reliance on,undisclosed test or other data generated to obtain marketing approval for pharmaceutical products. Although Russia amended its Law on Circulation of Medicines, it has not issued the final regulations that include the detailed provisions necessary to ensure the implementation of such protection.

The United States urges Russia to develop a more comprehensive, transparent and effective legal framework and enforcement strategy to reduce IPR infringement, particularly the sale of counterfeit goods, and the piracy of copyright-protected content. Although the United States has curtailed bilateral engagement with Russia on a myriad of issues in response to Russia’s actions in Ukraine, the United States continues to monitor Russia’s progress on these and other matters through appropriate channels.


Ukraine remains on the Priority Watch List in 2016. Ukraine was designated a Priority Foreign Country (PFC) in the 2013 Special 301 Report. As described in that report, the three grounds for Ukraine’s PFC designation were: (1) the unfair, nontransparent administration of the system for collecting societies, which are responsible for collecting and distributing royalties to U.S. and other right holders; (2) widespread (and admitted) use of unlicensed software by Ukrainian government agencies; and (3) failure to implement an effective means to combat the widespread online infringement of copyright and related rights in Ukraine, including the lack of transparent and predictable provisions on intermediary liability and liability for third parties that facilitate piracy, limitations on such liability for ISPs and enforcement of takedown notices for infringing online content.

The United States recognizes that Ukraine has taken some positive steps under extremely trying circumstances. A special unit was created within the National Police of Ukraine to investi gate IPR violations and enforcement officials have participated in international trainings on investigating IPR crimes. More broadly, the government appears to be working to address long-standing concerns about endemic corruption and mismanagement, including in IPR protection and enforcement. However, evidence of real progress is still not apparent and enforcement remains inadequate.

The United States is looking for more progress in addressing the three problems identified in the 2013 Special 301 Report. With respect to unauthorized collecting societies, little has changed. In the past year, the government has de-credited one of the “rogue” collecting societies and reportedly suspended two more societies pending investigation. However, approximately 15 other collecting societies continue to operate, collecting royalties without paying right holders. Moreover, efforts to pass legislation to address the underlying legal deficiencies of the collecting society system in Ukraine have not progressed.

With respect to improving the government’s response to online infringement, several attempts at legislative reform appear to have stalled. As highlighted in the 2015 Notorious Markets List, Ukraine continues to host some of the largest pirate sites in the world serving IP infringing content to a global audience.

Ukraine has taken some preliminary steps to reduce the use of unlicensed software by Ukrainian government agencies. For example, unlicensed software used by one of the pilot government agencies was reduced by more than 50 percent. Moreover, in addition to continuing to audit the software used by several government agencies, the Government of Ukraine, consistent with its goal of increased transparency, made the results of its inspections public, online. Notwithstanding these improvements, the overall piracy rate in the government remains unacceptably high, at 60-80 percent. The United States expects the Ukrainian government to set an example for its citizens and business community by legalizing the software used in its own operations, and requiring high levels of transparency in other IPR-related operations, such as its management of royalty collecting societies.

The Government of Ukraine has stated that it seeks to improve these and other IPR-related deficiencies to advance its own agenda for economic improvement, particularly in promoting foreign direct investment, ensuring that legitimate Ukrainian creators and innovators can build successful businesses, and fulfilling its IPR-related obligations under the EU-Ukraine Association Agreement. The United States looks forward to the new government turning its attention to addressing these long-standing problems. Tangible progress in this area will demonstrate that Ukraine is a stable and attractive investment climate. The United States will continue to engage with the Government of Ukraine.

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