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The International Creativity and Theft-Prevention Caucus

Senator Sheldon Whitehouse, Co-Chair



Congressman Adam B. Schiff, Co-Chair
Senator Orrin G. Hatch, Co-Chair

Congressman Bob Goodlatte, Co-Chair

International Creativity and Theft-Prevention Caucus Watch List
The Congressional International Anti-Piracy Caucus was founded in 2003 to call attention to the
rampant theft of Intellectual Property, both online and in physical marketplaces, and to call
attention to the very real economic impacts in the United States. Since its founding, the Caucus
has shined a spotlight on nations and actors who are failing to meet their obligations to protect
intellectual property. Over the past ten years, the landscape of piracy has evolved and changed
rapidly, and the Caucus has changed with it, focusing on working with good-faith actors in the
online space to shut off the profits to websites that steal the work of U.S. creators.
As part of that evolution, we are pleased to announce that the Caucus will now be known as the
International Creativity and Theft-Prevention Caucus. We believe this name better describes
the fundamental mission of the Caucus: Preserving the incentive to create new work that adds to
our economy and our culture by ensuring that those works are protected from theft.
Ad-Supported Online Theft
Addressing online piracy is an essential component of stopping the wholesale theft of American
intellectual property, and it requires a collaborative approach between governments and the
private sector. The Caucus has repeatedly highlighted the important role of private sector players
in reducing copyright infringement. In 2011, we first shined a spotlight on the all-too-common
incidence of ad-supported piracy websites, observing the frequent appearance of legitimate
advertising for major U.S. brands on websites dedicated to the theft of intellectual property. The
appearance of these ads generates substantial revenues for these illegal sites, while also lending a
false air of legitimacy.
Since we first highlighted the issue in 2011, additional research has demonstrated the full scale
of the problem. A February 2014 study by the Digital Citizens Alliance found that the 600
content theft sites studied generated $227 million in annual revenues through the sale of
advertising. The report, titled Good Money Gone Bad, showed that illegal websites can generate
enormous profits through the sale of advertising space, frequently to major U.S. companies.
The Caucus has corresponded with major players in the advertising space to encourage them to
study the problem, adopt best practices, and operationalize their commitment to keep advertising
off of sites dedicated to theft. We appreciate the commitments made by the Association of
National Advertisers (ANA), American Association of Advertising Agencies (4As), and
Interactive Advertising Bureau (IAB). The Caucus again wrote to the ANA, 4As, and IAB in
April 2014 asking them to take additional steps to make tangible and measurable progress
towards identifying rogue sites and ensuring legitimate advertising does not appear on their sites.
The Caucus appreciates the engagement on the part of stakeholders and the genuine interest in
addressing the issues.
The Caucus is pleased to announce the latest response to its correspondence dated June 19
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2014, in which ANA, 4As, and IAB provided a joint update on their activities. The Caucus
appreciates the additional details provided about concrete steps currently underway to evaluate
digital ad assurance technologies, and looks forward to continuing to engage with the
stakeholders who share our interest in cutting off ad revenues to sites engaged in content piracy.
Country Watch List
The American music, film, software, gaming, and book and journal publishing industries are
among Americas top exporters, and millions of jobs depend on their continued international
leadership. Americans must not be forced to subsidize the content that others steal. Likewise
American businesses should not be forced to compete with foreign companies that cut
production costs by using unlicensed software or pirated scientific articles.
The Creativity and Theft-Prevention Caucus calls attention in 2014 to continuing problems in the
protection of intellectual property in China, Russia, Switzerland, and India. As in past years, the
Watch List is not intended as a complete list of nations of concern or as a ranking of nations with
the greatest problems, but rather to call attention to new developments, both positive and
negative, in nations with inadequate laws and enforcement.
The Caucus also highlights positive developments in two nations, Italy and the Philippines, both
of which have longstanding issues with the protection of creative works. In light of the reforms
undertaken and a greater commitment to enforcing the law, both nations were removed from the
Special 301 Report for the first time in its 25 year history. The Caucus applauds Italy and the
Philippines for undertaking reforms that recognize the importance of fostering creativity.
The 2014 Country Watch List contains four countries: China, Russia, India, and Switzerland.
China
China has appeared on the Caucus Watch List and Special 301 Report since their respective
inceptions. Though the climate for intellectual property has improved, driven in part by a
growing domestic creative sector within China, the scale of piracy remains massive, inflicting
substantial harm to American and Chinese creators.

The scale of copyright infringement in China remains enormous, as do the losses to the U.S.
economy. A May 2011 United States International Trade Commission report found that overall
IP infringement (of which copyright infringement was found to be the largest part) in China costs
the U.S. economy as much as $107 billion and upwards of 2.1 million jobs. The loss is seen
across copyright intensive industries for example, spending on software per computer sold in
China remains among the lowest in the world due to wide-scale unlicensed use and the legitimate
music market is a fraction of much smaller countries.

In the coming year, the Caucus calls on China to follow through on the commitments it has
previously made, including fully implementing the U.S.-China Film Agreement to expand
market access for U.S. movies, and its bilateral commitments to ensure legal software use in
government agencies and state-owned enterprises. Additionally, a long-standing online piracy
problem affecting journal publishers remains unresolved, despite efforts by Chinese authorities
to shut down the service in 2013.
Despite the continuing obstacles, the Caucus does note signs of real progress and commitment on
the part of the Chinese government. These include examples of sustained and effective
enforcement actions against physical and online pirate marketplaces. Several major Chinese
websites, including the social network Baidu and the physical reseller Taobao, have been
removed from the USTRs Notorious Markets report reflecting the progress made in addressing
the prevalence of pirated content on their networks, though it remains the case that these services
can be more responsive to rights holder notifications of infringements occurring through their
platforms.
Russia
Russias lack of appropriate IP protection continues to allow for rampant Internet piracy,
impacting markets far beyond their borders. Stakeholders report that enforcement actions
decreased in 2013, which is particularly distressing in light of commitments made by Russia
prior to World Trade Organization accession in 2012. A December 2013 report to Congress on
the progress in Russia towards protecting IP found the current IPR enforcement environment in
Russia remains weak.
The Caucus urges the Russian Government to take prompt action against websites that actively
facilitate the theft of copyrighted materials, in particular vKontakte which was again named as a
Notorious Market while remaining one of the most highly trafficked websites in Russia. Given
the scale of online piracy emanating from Russia, it is crucial the Russia take serious and large
scale action to enforce the law against rogue actors and end their status as a haven for digital
piracy.
India
India continues to present a seriously flawed environment for the promotion of copyright and
Intellectual Property. Accordingly, the Caucus has added India to the 2014 Watch List, and notes
that the Special 301 Report again lists India as a Priority Watch List nation and announced the
intent to conduct an Out-of-Cycle Review of Indian progress later this year.
Despite a large domestic creative industry in film, music, and other copyright intensive
industries, India continues to lag badly in both the legal framework for protection of IP and
enforcement priorities. Among the continuing issues in India are extremely high rates of
camcording piracy, high levels of unlicensed software use by enterprises, and a lack of effective
notice-and-takedown procedures for online piracy.
Switzerland
In 2012, the Caucus added Switzerland to the Watch List based primarily on the deteriorating
climate for copyright in the country following the 2010 Logistep decision by the Swiss Federal
Supreme Court. The courts holding in the case rendered it virtually impossible for rights holders
to bring actions against large scale peer-to-peer infringers. There have been tentative steps to
address the situation, both legislatively and through a test case to force as reconsideration of the
Logistep precedent. A multi-stakeholder Working Group on Copyright 2012 (AGUR12) was
convened and provided unanimously endorsed legislative recommendations, including measures
to address websites providing access to infringing content, repeat infringers, and limited civil
liability.
The Caucus appreciates willingness of the Swiss government to engage in frank and forthright
discussions regarding their placement on the Watch List and the climate for intellectual property
protections. However, the timeline provided to take steps to bring Switzerland back up to
international standards for protection of copyright is insufficient to address the Caucuss
concerns. Most recently, the Swiss government announced in June 2014 that a proposal will not
be put before the legislature until late 2015 at the earliest. The Caucus cannot remove
Switzerland from the 2014 Watch List based on such a protracted timeline, with the end result
far from guaranteed. To the contrary, the Caucus urges the USTR to closely follow developments
in Switzerland to determine if additional steps should be taken, including conducting an Out-of-
Cycle Review or adding Switzerland to the 2015 301 Report Watch List.
Countries Making Progress
Italy
2014 is the first year since the Special 301 Reports inception in 1989 that Italy has not appeared
on the Watch List, recognition by USTR of the progress made by Italy towards protecting
intellectual property. The Caucus concurs with the judgment of USTR that Italy has made great
strides in the past year and accordingly has removed them from the Watch List. Specifically,
regulations adopted in December 2013 by the Italian Communications Regulatory Authority
(AGCOM) for the first time provide an expedited notice-and-takedown procedure for rights
holders. Stakeholders have also reported increased interest and cooperation on the part of Italian
authorities for enforcement actions against large scale infringers. The overall level of online
piracy in Italy remains high, but the Caucus believes it is important to recognize and commend
Italys tremendous progress especially its commitment over the past two years. We look
forward to working closely with the government of Italy and all responsible stakeholders to
ensure that the reforms adopted in 2013 are effectively and meaningfully implemented.
The Philippines
The Philippines has made substantial strides towards addressing what have been longstanding
shortfalls in copyright law and IP enforcement. The Philippines was removed from the Special
301 Watch List for the first time since 1989 as a result of sustained progress in the protection of
intellectual property rights. The Caucus applauds the efforts by the Philippine Government to
protect intellectual property.