The Office of the United States Trade Representative (USTR) today issued its annual "Special 301" report which highlights copyright theft concerns in foreign markets, including in particular China, Russia and Canada.

This report identifies a wide range of concerns, including troubling "indigenous innovation" policies that may unfairly disadvantage U.S. rights holders in China, the continuing challenges of copyright piracy over the Internet in countries such as Canada, Spain, Italy and Russia, and the ongoing IPR enforcement issues presented in many trading partners around the world.

The 2011 Special 301 review process examined IPR protection and enforcement in 77 trading partners. Following research and analysis, USTR has listed the 42 trading partners below as follows:

Priority Watch List: Algeria, Argentina, Canada, Chile, China, India, Israel, Indonesia, Pakistan, Russia, Thailand, Venezuela.

Watch List: Belarus, Bolivia, Brazil, Brunei, Colombia, Costa Rica, Dominican Republic, Ecuador, Egypt, Finland, Greece, Guatemala, Italy, Jamaica, Kuwait, Lebanon, Malaysia, Mexico, Norway, Peru, Philippines, Romania, Spain, Tajikistan, Turkey, Turkmenistan, Ukraine, Uzbekistan, Vietnam.

Section 306 Monitoring: Paraguay.

As has been the case for some time, copyright theft in China and Russia continue to be reflected in the report as countries on the "Priority Watch List." The Chinese marketplace, long dominated by piracy. The physical market was decimated by piracy, and digital distribution promised a new beginning. Unfortunately, the digital market now closely resembles its physical counterparts, with theft levels well above 90 percent, fueled principally by the deep-linking, unlicensed music services by companies such as Baidu, Sohu and Xunlei who, as major actors in the Internet space, should know better. The Chinese government has recently undertaken some enforcement actions against Baidu, and has committed to reform its legal structure to ensure that those who facilitate copyright infringement like Baidu are held to be as equally liable as those who directly engage in this theft.

The picture in Russia is eerily similar to that in China. A physical market long dominated by piracy has now evolved into an online market dominated by piracy. And like China, problems in the Russian online market are primarily fueled by a major Internet actor- vKontakte which, like Baidu, was named as a 'notorious market' in USTR's separate report highlighting piracy hotspots. vKontakte operates a music service wholly premised on the making available of infringing materials, and offers its users a easy interface for locating the infringing music of their choice.

Canada's inclusion in the "Priority Watch List" is certainly warranted, and undoubtedly a source of continued confusion and frustration. Canada is virtually alone in the developed world in failing to bring its copyright standards into line with accepted international standards for the digital age. As a direct result, it has become a heaven for many individuals and companies wishing to cash in from providing access to illegal content.

The Spanish music market has been decimated by online piracy during the past five years, fuelled by government policies that made meaningful enforcement impossible. The recent adoption of the Sustainable Economy Law could be a first step in addressing online theft. The Spanish government has presented a report to USTR outlining the fact that the law will allow them to take action against torrent sites, trackers and linking sites, as well as against sites that host illicit materials.

The online piracy problem in Italy has also been severe, but the government has already taken some significant actions to address it, and the Communications authority appears poised to adopt a regulation that could have a significant impact in addressing Internet piracy.