U.S. issues annual Special 301 report on intellectual property rights

Today, the Office of the U.S. Trade Representative issued its “Special 301” report. This annual review of the state of intellectual property rights (IPR) protection and enforcement around the world identifies both the progress and continuing challenges that exist with respect to IPR enforcement. In an unusual step, the Administration today designated Ukraine as a “priority foreign country” (PFC) which begins an investigation leading to possible sanctions consistent with trade statutes. Software piracy was identified as one of three issues that led to the designation.

PFC designation is a serious tool in IPR enforcement.

IPR protection is one of the key drivers of sustained economic growth and innovation, and Ukraine has enormous potential in this area. In July last year, Team quadSquad from Ukraine won the Imagine Cup, a world-wide competition sponsored by Microsoft for its winning project, Enable Talk, a software solution that transforms sign language into a form of verbal communication through sensor-equipped gloves and a mobile device. Without question, Ukraine has some of the best and brightest engineers and software developers who would benefit from a robust IPR regime. 

The Business Software Alliance’ (BSA) latest figures show that Ukraine has one of the highest overall piracy rates in the world, where only about 16 percent of the software utilized in the country is legitimate. The high incidence of software piracy, particularly by governments and state-owned enterprises, is not without risk. Findings of a global IDC study, titled “The Dangerous World of Counterfeit and Pirated Software 2013,” estimates that the direct costs to enterprises from dealing with malware from counterfeit software will hit $114 billion this year. The potential losses from data breaches could reach nearly $350 billion.

We are hopeful that the designation spurs Ukraine into genuine action to address the problem of software piracy, given Ukraine’s enormous potential. We are interested in finding solutions to this challenge.

Last year, the U.S. Government released a study: “Intellectual Property in the U.S. Economy: Industries in Focus.” The study found IP-intensive industries accounted for about $5.06 trillion in value added, or 34.8 percent of U.S. gross domestic product (GDP), in 2010. Direct and indirect employment in U.S. IP-intensive industries amounted to 27.1 million jobs in 2010, while indirect activities associated with these industries provided an additional 12.9 million jobs throughout the economy, for a total of 40.0 million jobs, or 27.7 percent of all jobs in the U.S. As the study noted, this means every two jobs in IP-intensive industries support an additional job elsewhere in the economy.

Microsoft commends the USTR-led Interagency work on Special 301 again this year to systematically address software legalization as an issue in IPR enforcement. This is all about jobs and our continued competitiveness in the global economy.

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