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 business and entertainment software piracy. The United States encourages Bolivia to increase its anti-piracy and anti-counterfeiting activities and to institute IPR legislative reforms during 2005.

BULGARIA Bulgaria is being retained on the Watch List in 2005 due to the dire need for improvements in its IPR regime, particularly with respect to anti-piracy and anti-counterfeiting enforcement efforts. Copyright piracy has increased in the past few years, after a period of dramatic decline in the mid- to late-1990's. The Bulgarian Government has not taken effective steps to stop the increase in piracy and counterfeiting activity. The U.S. copyright industry reports that this past year Bulgaria had high rates of optical disc piracy, estimating that approximately 70 percent of all foreign sound recordings produced in Bulgaria were illegal copies. Pirated CDs and DVDs are increasingly available throughout the country. We are encouraged by recent reports that the Bulgarian Government is taking steps to implement a new optical media licensing system, including current efforts by Bulgaria's Parliament to pass its optical disc legislation. However, the U.S. copyright industry reports that the proposed optical disc legislation needs to be amended in certain respects prior to its adoption. We will continue to closely watch these legislative developments in Bulgaria. In addition, we recommend that Bulgaria amend its criminal code and criminal procedure code to correct severe shortcomings which undercut the possibility of effective enforcement. For example, we hope that Bulgaria will improve its polycarbonate import registration scheme, an important tool for addressing optical disc piracy. With respect to IPR enforcement, Bulgarian police authorities have increased their cooperation with rights holders. However, despite some progress in the area of enforcement, enforcement of the current optical disc licensing regime is ineffective. Judicial trials are replete with extensive delays and convicted pirates and counterfeiters usually receive only minimal sentences. There are currently eight known operational optical disc plants in Bulgaria, with the output of those plants far exceeding the country's legitimate demand. In addition, production and smuggling of counterfeit distilled spirits has continued to grow. While Bulgaria has increased its investigations into the sources of counterfeit production and distribution, no criminal charges have been filed as a result of these inquiries. We remain concerned with the increases in copyright piracy and trademark counterfeiting, and the United States will continue to monitor Bulgaria's near-term progress in combating these illegal activities.

CANADA Canada is being maintained on the Special 301 Watch List in 2005, and the United States will conduct an out-of-cycle review to monitor Canada's progress on IPR issues during the upcoming year. We urge Canada to ratify and implement the WIPO Internet Treaties as soon as possible, and to reform its copyright law so that it provides adequate and effective protection of copyrighted works in the digital environment. The Canadian court decision finding that making files available for copying on a peer-to-peer file sharing service cannot give rise to liability for infringement under existing Canadian copyright law underscores the need for Canada to join nearly all other developed countries in implementing the WIPO Internet Treaties. The U.S. copyright industry is concerned about proposed copyright legislation regarding technological protection measures and internet service provider (ISP) liability, which if passed, would appear to be a departure from the requirements of the WIPO Internet Treaties as well as the international standards adopted by most OECD countries in the world. The United States urges Canada to adopt legislation that is consistent with the WIPO Internet Treaties and is in line with the