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 enforcement, including ineffective prosecutions, minimal judicial sentences, shortcomings in current and draft legislation, and lax border measures have contributed to this resurgence. Further amendments to close loopholes are still needed to fix the pending optical disc legislation. In addition, production and smuggling of counterfeiting of U.S. distilled spirits has grown at an alarming rate. Large public amusement centers use images of copyrighted cartoon characters. The Government of Bulgaria should take the necessary administrative actions to stop optical disc piracy and the counterfeiting of spirits and other goods. We commend Bulgaria for providing protection for confidential test data in its new drug law and for its commitment to have government ministries purchase and use only licensed business software. However, we remain concerned over the growing rate of copyright piracy and spirits counterfeiting and will continue to monitor Bulgaria's progress on effectively combating these illegal activities.

CANADA

Canada has again been placed on the Special 301 Watch List. After making significant progress in improving its IPR regime in 2001 and 2002, Canada made little headway in addressing long-standing intellectual property issues related to copyright and patent reform such as ratification of the WIPO Internet treaties, and implementation of legislation on patenting of higher life forms. Progress has stalled on resolving the outstanding issue of national treatment of U.S. artists in the distribution of proceeds from Canada's private copying levy and its "neighboring rights" regime. Systemic inadequacies in Canadian administrative and judicial procedures continue to allow the early and often infringing entry of generic versions of patented medicines into the marketplace. Enforcement against IP infringement improved through a concerted government and industry effort to address radio signal theft, but these renewed efforts did not carry over into other areas of counterfeiting and piracy. In fact, a recent Canadian court decision has found peer-to-peer file sharing to be legal under the Canadian copyright law, a position that underscores the need for Canada to join nearly all other developed economies in implementation of the WIPO Internet treaties. Canada's border measures continue to be a serious concern for IP owners, who consider Canada's border enforcement measures to be inconsistent with its TRIPS obligations. The United States urges Canada to take effective measures to strengthen border enforcement, including the enactment of legislation that would allow Canada's customs officials to conduct ex officio searches of incoming and outgoing products suspected to be pirate or counterfeit.

CHILE

The U.S.-Chile Free Trade Agreement (FTA) entered into force on January 1, 2004. The intellectual property chapter of the FTA provides high levels of protection appropriate for the digital age, including non-discriminatory treatment for U.S. software, music, text, and motion pictures. Protections for U.S. patents, trademarks, and undisclosed information obligate Chile to conform its IP laws and enforcement practices to advanced standards. The FTA includes important protections for Chilean writers, singers, and software developers, specifically ensuring that they will continue to reap the rewards of their creativity in the digital realm. In late 2003, two sets of amendments were made to the copyright law to implement TRIPS and the FTA. However, some substantive IPR deficiencies remain, and enforcement continues to be irregular. Copyright piracy is still quite high and indeed has increased slightly in recent years, as digital piracy becomes more prevalent. In addition, the United States was very disappointed with the registration of several pharmaceutical products that appear to infringe validly issued Chilean patents. We expect these issues to be resolved through Chile's implementation of the FTA and look forward to following Chile's progress in meeting its commitments. Upon full implementation of the U.S.-Chile Free Trade Agreement, we would expect to re-evaluate Chile's Special 301 status.