Following is the text of Larson's testimony as prepared for delivery:

Testimony of Alan Larson
Under Secretary of State
for Economic, Business and Agricultural Affairs

before the
Senate Committee on Foreign Relations
Washington, D.C.
February 12, 2002

Thank you for the opportunity to meet with you today to discuss intellectual property policy and enforcement. The United States is a knowledge-based, innovation-driven economy. The protection of intellectual property rights is critically important to our prosperity and economic leadership.

The Department of State is fully committed to the Administration's goal of advancing the protection of intellectual property worldwide. At all levels of the Department, we are actively engaged in a cooperative effort that involves other Washington agencies, the private sector, and foreign governments.

What I would like to do today is to touch on some recent trends in intellectual property protection, and then describe briefly the role of the Department of State.

Recent Trends in Intellectual Property Protection

In assessing the state of intellectual property protection overseas, we see two complementary and positive trends in recent years. First, we observe a significant, if not readily quantifiable, increased appreciation of the benefits inherent in effective protection of intellectual property. More and more of our trading partners are coming to understand that their future growth and development depends in large part on their becoming active players in the knowledge-based economy. They also are coming to appreciate that strong intellectual property protection is necessary to create an attractive investment climate. In short, economic self-interest is becoming a very important factor in enhancing intellectual property protection overseas.

Recent statistics about our own economy are illustrative. The copyright industries now account for about five percent of our GDP, and this sector has grown at twice the rate of the rest of the U.S. economy. The positive impact of intellectual property protection can also be seen in India's emergence as a dynamic competitor in the world's computer software sector after that country adopted higher levels of copyright protection. However, Indian scientists do not yet enjoy similar levels of patent protection for pharmaceutical products. As a result, domestic innovation and growth in that sector remain stymied.

Although much more remains to be done, we believe we have made tangible progress in improving the level of intellectual property protection around the world. Many developing country World Trade Organization (WTO) Members have passed domestic legislation and begun to implement enforcement measures to comply with their obligations under the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

On September 10, 1998, I testified before this Committee in support of the so-called "Internet" Treaties administered by the World Intellectual Property Organization (WIPO). The Senate did promptly give its advice and consent to these treaties. As a result, they expand the protection afforded by the TRIPS Agreement to the new technological environment and provide a legal framework to facilitate the further development of electronic commerce.

I thank the Committee for its quick action. I am pleased to note the WIPO Copyright Treaty has been ratified by enough governments for it to enter into force in March. We continue to urge other governments to ratify as well the companion WIPO Performances and Phonograms Treaty.

Although the trends for effective intellectual property protection are positive, significant challenges remain. A key focus of this year's Special 301 review under its chairmanship by the Office of the U.S. Trade Representative (USTR) will be the growing problem of piracy of optical media (music CDs, video CDs, CD-ROMs, and DVDs).

This pernicious form of piracy spreads quickly, infecting whole regions unless strong and effective measures are taken to prevent illicit operators from setting up shop. But it can be stopped if governments are willing to act -- as did the Government of Bulgaria several years ago.

When the pirates moved into new fields of opportunity in Ukraine, the Department and our Embassy in Kiev began working intensively with USTR, other government agencies and the private sector to press the Government of Ukraine to close down pirating facilities. For a time, our joint efforts were somewhat successful, but the commitment of the Government of Ukraine unfortunately did not last. Last year's designation of Ukraine as a Priority Foreign Country and the recent imposition of sanctions sends a strong signal that we will not tolerate wanton piracy of our intellectual property.

Another priority will be implementing initiatives to proactively combat computer software piracy. The Department of State is working closely with USTR and the private sector to get our trading partners to require government ministries and offices to use only authorized software.

In addition, we are working closely with USTR and other Washington agencies to help ensure that WTO Members comply fully with their legislative and enforcement obligations under the TRIPS Agreement. These obligations came due for developing countries on January 1, 2000.

The success we achieve through these and other intellectual property initiatives depends on the close and constructive relationship we enjoy with the private sector. The progress we have made to date has been and will continue to be a joint enterprise.

The State Department's Role in Intellectual Property Policy and Enforcement

The Department of State has as its primary mission using U.S. foreign policy tools to protect Americans' security and prosperity. The protection of intellectual property abroad figures prominently among our international economic objectives. Our Ambassadors and embassy country teams around the world are devoted to promoting the protection of intellectual property, by mobilizing U.S. Government agencies in the field, host government officials and the private sector.

Internal Preparation

New Foreign Service officers learn about the Department's policy in this area as they enter on duty. Members of each orientation class are briefed on the importance of intellectual property protection, and the key place it occupies in our international economic policy agenda.

We also provide intellectual property training as part of our mid and senior level professional courses. Specialized training for economic officers includes instructional modules on intellectual property. Working with our colleagues from the U.S. Patent and Trademark Office (USPTO) and the Copyright Office of the Library of Congress (Copyright Office), we also provide a stand-alone course on intellectual property that is geared specifically to economic officers being assigned to positions in countries where intellectual property issues are particularly challenging.

Chiefs of Mission and Deputy Chiefs of Mission are briefed on intellectual property issues before assuming their duties. They and Economic officers headed to overseas posts receive briefings from other agencies and the private sector. A number of representatives from the intellectual property organizations we receive briefings from are testifying before the Committee today.

Finally, I have made it a practice to meet with outgoing Chiefs of Mission. The importance of intellectual property protection is high on my agenda in all these sessions.

Cooperative Activities

The Department of State plays a strong role in the annual USTR-led Special 301 review of country intellectual property practices. Participating agencies rely heavily on the accurate, up-to-date information we receive from our posts abroad. The objective of the review is not simply to give our trading partners an intellectual property report card. Rather, we seek to employ Special 301 to leverage real progress with host governments. In this regard, our Ambassadors and embassy officers overseas play a critical role. They are well positioned to effectively convey our views and they have the on-the-ground contacts needed to work the issues with host governments and the private sector.

Our participation in the Special 301 process is a year-long commitment to bilateral engagement with countries worldwide. Our posts are continuously looking for ways to bring together all parties of the intellectual property community, and to help them work together more effectively.

With growing evidence of links between intellectual property crime, organized crime and funding for terrorist activities, embassy country teams are seeking to foster closer ties between U.S. Government agencies and the foreign counterparts who work these enforcement issues.

Another focus of the Department of State's work is our active participation in international negotiations. At the WTO Ministerial in Doha, I worked closely with my USTR colleagues and the private sector to reach agreement on a Declaration on TRIPS and Public Health. The Declaration fended off efforts to weaken TRIPS by reaffirming the commitment of WTO Members to the TRIPS Agreement and by drawing attention to the flexibilities the Agreement already affords WTO Members in pursuing their public health objectives.

The Department of State has joined with other U.S. Government agencies in working closely with the World Intellectual Property Organization (WIPO). In addition to establishing new norms in the area of intellectual property, one of the Treaties administered by WIPO saves our inventors and innovators countless dollars as well as time in registering patents overseas. WIPO also provides a valuable service in training developing countries to improve their intellectual property regulatory regimes. WIPO's efforts include those taken in cooperation with U.S. Government agencies and the U.S. private sector.

Training, Technical Assistance and Public Diplomacy

As developing countries strive to improve their intellectual property regimes, the U.S. Government and the private sector are receiving an increasing number of requests for intellectual property training and technical assistance.

The U.S. Agency for International Development (USAID) estimates it provided $7.1 million in assistance over the period 1999-2001 to developing and transition countries to support their implementation of the TRIPS Agreement. The Department of State's Bureau of International Narcotics and Law Enforcement allocated about $377,000 for IPR training in FY 2001. Our Bureau of Educational and Cultural Affairs brings to the United States officials, academics, journalists and business people from developing countries to show them the benefits of protecting intellectual property rights -- thereby creating advocates for stronger intellectual property protection.

The U.S. Customs Service, USPTO, the Federal Bureau of Investigation, the Department of Justice, the Department of Commerce, the Copyright Office, and USTR participate in these training and assistance activities by providing experts for programs funded by USAID, the Department of State, and by their own budgets. U.S. industry also funds and provides significant amounts of training to developing countries.

The Department of State chairs an Intellectual Property Rights Training Coordination Group that is working with other U.S. agencies and the private sector to prioritize program proposals and to ensure we get the most out of our training and assistance investments. It responds to training and assistance recommendations from both our embassies overseas and industry. To enable government and the private sector to more effectively pool their efforts, the Group is working to improve a database of training programs. Examples of some of these programs include:

-- Seminars sponsored by USAID for the Jordanian public and private sector on benefits of intellectual property protection, and training for Jordanian judges on intellectual property laws.

-- International Law Enforcement Academies' IPR enforcement programs, where State provides the facility and program funding and U.S. Government enforcement agencies provide the substantive expertise.

-- Conferences sponsored by the Department of Commerce under its Commercial Law Development Program (CLDP), which bring in officials from foreign governments. A recent conference in Croatia included officials from Albania, Bosnia and Herzegovina, Bulgaria, Croatia, FYR Macedonia, and Romania.

-- Twice-annual Intellectual Property Enforcement and substantive intellectual property rights programs, both sponsored by USPTO in Washington, D.C. The Department of State, through its posts worldwide, assists the USPTO by locating eligible candidates for both programs.

Our embassies and consulates also have hosted assistance programs sponsored by the private sector. For example, in Bulgaria, the Motion Picture Association of America (MPAA) sponsored a program to train border control police and customs officers on identification of pirated product. In Croatia, the Business Software Alliance (BSA) provided training on software piracy for Croatian trade inspectors.

Some of the most effective training programs are educational efforts organized or sponsored by the Department of State's public diplomacy corps. A recent example of this was a conference organized by the Public Affairs Section of our Consulate General in Sao Paulo, Brazil. The purpose of the conference was to explore ways to combat piracy in the Brazilian market, including better training and public/private collaboration.

The conference was itself a shining example of the partnering that is possible with the private sector. The Consulate General staff worked with the Brazilian government and industry representatives to organize the conference, drawing in law enforcement officials, representatives of anti-piracy groups, and leaders from the entertainment and software industries. The value of this conference -- and this type of initiative -- was confirmed by positive post-conference comments from both MPAA and the Recording Industry Association of America (RIAA).

Other examples of public diplomacy efforts include:

-- Sponsoring officials from developing countries to travel to the United States as part of the State Department's International Visitors Program to study intellectual property protection in the United States. As part of their program agendas, these officials receive specific training from such agencies as USPTO, the U.S. Customs Service, the Copyright Office, and the Department of Justice.

-- Sending intellectual property experts abroad as speakers to various developing countries.

-- Hosting our widely appreciated WorldNet interactive videoconferences, which enable intellectual property experts to reach broad public and private sector audiences in several countries at the same time.

-- Creating an intellectual property web site for foreign audiences which will include key reports, international agreements, links to relevant U.S. Government web sites, fact sheets, and original articles on current intellectual property issues. This web page will be launched today. Its url address is: http://usinfo.state.gov/topical/econ/ipr.

Success Stories

The educational work of our embassies and consulates, their reporting and their interventions with foreign government officials have helped the U.S. Government in many other instances to advance intellectual property protection. Following are several examples:

In Hong Kong, persistent efforts on the part of consulate officers paid off when authorities passed a good optical disk law, shut down pirating production lines and drove pirating distributors out of business.

In Singapore, embassy interventions convinced the local authorities to shut down "night markets" which sold pirated merchandise.

In Greece, ambassadorial pressure in a sustained campaign played a key role in convincing the government to pass tougher enforcement laws. As a result, audiovisual piracy -- specifically TV stations showing movies without paying royalties -- has declined from $100 million to near zero.

In the UAE, repeated representations by the Ambassador resulted in successful raids on stores selling pirated computer software. Also, the Ambassador received the Department's Charles E. Cobb Award for helping the UAE and the Pharmaceutical Research and Manufacturers of America (Ph RMA) reach agreement ending UAE piracy of U.S. pharmaceutical products.

In Slovenia, embassy interventions, using Special 301 as leverage, convinced the government to pass legislation protecting test data submitted to obtain marketing approval for pharmaceuticals.

In Paraguay, embassy efforts helped convince the government to accede to both the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty. The officer who led this effort received the Department's Charles E. Cobb, Jr. Award for Initiative and Success in Trade Development.

In South Africa, embassy initiatives led to the founding of a group representing all intellectual property industries and companies in the country. The group then developed ways for customs agents at remote borders to better identify counterfeit goods.

In Argentina, the Deputy Chief of Mission was honored by Ph RMA for his outstanding support
as a determined advocate for adequate and effective intellectual property protection for pharmaceutical products in that country.

Conclusion

The State Department's contribution to intellectual property protection rests in large part on our ability and commitment to work with all relevant parties, public and private, both here and abroad. We welcome this broad responsibility and opportunity. The challenge for the United States and for other countries throughout the world to strengthen their "innovation economies" relies not only on protection of intellectual property, but also on the free flow of information and ideas that is characteristic of democracy.