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 acute in light of Chinese Government policies that appear to establish a procurement preference for domestically innovated products. The Chinese Government is currently considering legal and/or policy changes in areas such as the scope of compulsory licensing of patented inventions, the treatment of IPR in setting standards, and other areas that have the potential to affect IPR protection and market access for IPR-reliant goods and services. The United States will monitor these developments closely to ensure fair and equitable treatment for U.S. rightsholders.

China also maintains market access barriers, such as import restrictions and restrictions on wholesale and retail distribution, which can discourage and delay the introduction of a number of legitimate foreign products that rely on IPR into China's market. These barriers create additional incentives for infringement of products like movies, video games, and books, and inevitably lead consumers to the black market, again compounding the severe problems already faced by China's enforcement authorities. The United States has initiated WTO dispute settlement on several market access barriers affecting U.S. copyright industries.

The treatment of IPR in standards-setting processes has garnered continuing attention in China and elsewhere. The United States understands that the Standards Administration of China is expected to issue revised draft regulations regarding the treatment of patents and other IPR in national standards. Earlier draft regulations, issued in 2005, prohibited the incorporation of patents in mandatory national standards. U.S. stakeholders continue to have concerns about these issues, due in part to recent Chinese Government officials' public comments suggesting that patent holders might be required to share their patented technologies on a royalty-free basis or meet other mandatory requirements such as participation in patent pools, in order to participate in the standards development process.

China enacted the Third Amendment to its Patent Law in 2008. These changes will go into effect on October 1, 2009. While many areas of the Patent Law were clarified and improved, rightsholders have raised a number of concerns about the new law. For example, the requirement to disclose the origins of genetic resources has led to concerns regarding whether a patent application can be rejected or whether the validity of a patent can be challenged if the disclosure requirements are not met. Also, there are concerns regarding the inadequacy of a two year statute of limitation for filing a patent infringement case and about the scope and role of compulsory licensing under the new law. In addition, while the United States welcomes proposals in China's 2008 Action Plan on IPR Protection to more closely coordinate patent grants with pharmaceutical marketing approval, the United States continues to have concerns about the extent to which China provides effective protection against unfair commercial use for undisclosed test or other data generated to obtain marketing approval for pharmaceutical products.

The United States believes that continued bilateral dialogue and cooperation can lead to further progress in these and other areas. The United States will continue to put serious efforts into its joint work with China on IPR enforcement and protection strategies, innovation policies, and the range of other important IPR-related matters in our bilateral economic relationship, including through the Joint Commission on Commerce and Trade (JCCT) and other fora.