The Office of the US Trade Representative has published its 2012 Special 301 Report. While there was good news for Spain and Malaysia, who exit the Watch List, concern over counterfeiting and rampant piracy have led to the Ukraine being placed on the Priority Watch List.

The annual report examines the adequacy and effectiveness of IP rights protection in the trading partners of the United States, and follows close on the heels of the US Department of Commerce’s report on the contribution intellectual property makes to the economy.

Considering trends in counterfeiting, the report notes that continued growth in the online sale of pirated and counterfeit hard goods will result in online infringement soon surpassing the volume of such goods sold by street vendors and in other physical markets. It also highlighted difficulties in detection, as counterfeiters increasingly use legitimate courier services to deliver infringing goods and also ship counterfeit products separately from labels and packaging in order to avoid detection.

Of the 77 trading partners, 40 were placed on the Priority Watch List, Watch List or the Section 306 monitoring list:

• Priority Watch List: Algeria, Argentina, Canada, Chile, China, India, Indonesia, Israel, Pakistan, Russia, Thailand, Ukraine, Venezuela.
• Watch List: Belarus, Bolivia, Brazil, Brunei Darussalam, Colombia, Costa Rica, Dominican Republic, Ecuador, Egypt, Finland, Greece, Guatemala, Italy, Jamaica, Kuwait, Lebanon, Mexico, Norway, Peru, Philippines, Romania, Tajikistan, Turkey, Turkmenistan, Uzbekistan, Vietnam.
• Section 306 Monitoring: Paraguay.

The notable changes centred on Malaysia, Spain and the Ukraine. Malaysia’s removal from the Watch List results from its legislative efforts to protect copyright and its anti-piracy enforcement activities, although concerns remain over its pharmaceutical data protection regulations and border enforcement with respect to transshipments. Spain, meanwhile, was applauded for its adoption of the Sinde Law and similarly exits the Priority List.

However, there was bad news for the Ukraine, which makes the Priority Watch List after making “minimal progress” in implementing its 2010 IPR action plan commitments. The report adds: “Ukraine has also done little to address counterfeiting and piracy, and in some cases took steps backwards. For example, several days after Ukrainian police took down the country’s largest infringing website (‘ex.ua’), authorities allowed the site to re-open. Likewise, the number of IP inspectors at the State Intellectual Property Service of Ukraine has been significantly reduced”.

The report therefore calls on the country to take urgent steps to address online piracy and to improve its judicial system.