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 While Ukraine's broader intellectual property environment has several flaws, as discussed in previous Special 301 Reports, the specific grounds for the U.S. Trade Representative's designation of Ukraine as a PFC are: (1) the unfair, nontransparent administration of the system for collecting societies, which are responsible for collecting and distributing royalties to U.S. and other rights holders; (2) widespread (and admitted) use of illegal software by Ukrainian government agencies; and (3) failure to implement an effective means to combat the widespread online infringement of copyright and related rights in Ukraine, including the lack of transparent and predictable provisions on intermediary liability and liability for third parties that facilitate piracy, limitations on such liability for Internet Service Providers (ISPs), and enforcement of takedown notices for infringing online content.

Out-of-Cycle Reviews

An Out-of-Cycle Review (OCR) is a tool that USTR uses to encourage progress on IPR issues of concern. It provides an opportunity for heightened engagement with trading partners to address and remedy such issues. Successful resolution of specific IPR issues of concern can lead to a change in a trading partner's status on a Special 301 list outside of the typical time frame for the annual Special 301 Report. Although Spain is not listed in the 2013 Special 301 Report, USTR will conduct an OCR of Spain focusing in particular on Spain's concrete steps to combat copyright piracy over the Internet. USTR will also conduct an OCR of El Salvador, which remains unlisted, to monitor progress on IPR protection and enforcement, in particular with respect to the implementation of new legislation on pharmaceuticals and with respect to enforcement efforts, among other concerns. Several trading partners have requested that USTR conduct OCRs based on their projections for improvements in IPR protection and enforcement; USTR may conduct additional OCRs in consultation with a trading partner as circumstances warrant.

Out-of-Cycle Review of Notorious Markets

In 2010, USTR began publishing the Notorious Markets List as an OCR separately from the annual Special 301 Report. The Notorious Markets List identifies selected markets, including online markets, that are reportedly engaged in piracy and counterfeiting, according to information submitted to USTR in response to a request for comments. USTR requested such comments on August 14, 2012, and published the 2012 OCR of Notorious Markets on December 13, 2012. USTR plans to conduct an OCR on notorious markets in the fall of 2013.

Format of the Special 301 Report

The Special 301 Report is divided into the following two main sections and two Annexes: 7