Why These Countries Made the Watch List for US Trade Secret Theft in 2023

There is a wide variety in the types of things with which government institutions must concern themselves. Some are tasked with particular sectors, such as education, agriculture, or housing. The U.S. Trade Representative (USTR) is an entity that negotiates trade agreements and resolves disputes with foreign nations.

The USTR publishes the Special 301 Report as “the result of an annual review of the state of intellectual property (IP) protection and enforcement in U.S. trading partners.” This report includes a breakdown of a number of partner countries, exploring the concerns presented by various nations regarding the protection of IP and how those concerns may lead to problems arising in trade partnerships.

Risks and Consequences of IP Theft

The theft of intellectual property (IP) “is an illicit activity that manifests through the unauthorized use, reproduction, or distribution of intellectual property owned by others.” The definition of IP is broad and includes property such as patents, copyrights, and trade secrets. It can be harder to pin down IP theft than theft of physical property, but the crime is no less concerning or impactful.

One major concern regarding IP theft is that it can stifle innovation and technological advances: violating IP rights is a much quicker route to success than developing unique ideas. Individuals and organizations are also less likely to engage in creating their own IP if they do not have faith in its secure protection. Upholding IP rights incentivizes investment in new endeavors.

Because a large portion of jobs and revenue originate in IP-intensive industries, IP theft starts a ripple effect that can extend across many sectors of the economy and even further. IP theft, and in particular the theft of trade secrets, hinders not only the ability to use that piece of IP to generate revenue, but also any future endeavors built on that IP. The theft of sensitive government IP can have far-reaching impacts including threats to national security and infrastructure.

Countries on the Watch List

The 2023 Special 301 Report notes that the USTR’s review of Ukraine has been suspended as a result of Russia’s full-scale invasion of the smaller country. Ukraine was on the priority watch list in 2021, but further review in subsequent years has been deferred. The countries placed on the priority watch list in 2023 are:

• Argentina: Enforcement of IP rights is difficult, and the market for counterfeit and pirated goods and services presents difficulties for stakeholders. Counterfeit goods are being sold not only in physical markets, but through social media as well.
• Chile: Long-standing issues pertaining to some IP provisions of the United States-Chile Free Trade Agreement continue to pervade the relationship. Chile lacks protections against unlawful circumvention of technological protection measures (TPMs), including online piracy.
• China: While China has made some progress in recent years concerning patent law, copyright law, and criminal law, reforms targeting IP theft and enforcement of protections has slowed. Many of the concerns of the USTR regarding China are acute concerns about Chinese market dominance and strategic manipulation of IP law.
• India: In spite of an increased public awareness of the importance of IP and engagement on IP issues with the United States, India remains on the priority watch list. This is largely due to a failure to make meaningful progress in areas of concern raised in earlier reports, particularly patent law. India limits IP protections with the justification of promoting access to technologies.
• Indonesia: Challenges posed to U.S. right holders in Indonesia include ineffective IP protection and enforcement and concerns regarding fair and equitable market access. Piracy and counterfeiting pervade the market due to a lack of deterrent-level penalties and inadequate border enforcement.
• Russia: Even without other factors like the invasion of Ukraine muddying the waters and increasing tensions, the state of IP protection and enforcement in Russia is concerning. Stakeholders report that Russia suffers from inadequate IP enforcement and that authorities lack the staffing, expertise, and political will to quash IP violations and institute protections.
• Venezuela: Recent developments in Venezuela have led to greater challenges to effective IP protection and enforcement. One major deterrent to investment in innovation and IP protection is the reinstatement of a 1955 law that fails to meet international standards. There is a large market for pirated and counterfeit goods, and IP enforcement continues to fall short.

The non-priority watch list consists of 22 countries worldwide that present a less acute danger to IP in the United States, but still require some increased protections and enforcement. These nations include Brazil, Bulgaria, Canada, Egypt, Mexico, Pakistan, Thailand, Turkey, and Vietnam.

Conclusion

In a global economy, it is important for countries to meet certain standards of protection against IP theft and enforcement of IP law to maintain favorable political and economic relationships. The USTR’s Special 301 Report is an exploration of which nations pose a challenge to U.S. IP protection, the issues that they present, and how they might make changes to remedy the state of their IP law. Many countries suffer from a lack of adequate IP protections and enforcement, and harbor massive markets for pirated and counterfeit goods both online and in physical locations.