By Ora Coren

The United States is expected to keep Israel on its "priority watch" list of countries alleged to violate intellectual property rights laws, U.S. State Department officials said over the weekend.

They said that reports received from the U.S. embassy in Tel Aviv indicated widespread and open violation of copyright law, particularly in factories illegally reproducing compact discs in the Galilee.

Every April the U.S. Secretary of Trade publishes a list categorizing countries into four groups in terms of the degree to which they violate copyright laws.

The brunt of the U.S. criticism of Israel is that it illegally reproduces music and computer programs and fails to enforce laws against copyright infringement.

U.S. record and software companies, along with pharmaceutical companies, are the main industries pressing Washington to take a tougher stance against Israel.

Drug companies contend that Israeli patent law actually encourages violation of proprietary rights in their sector.

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The director-general for economic affairs at the Foreign Ministry, Victor Harel, heard American assessments of the situation when visiting the U.S. last week. He said the continued CD piracy that is going on under broad daylight in Israel is a major sore point with the Americans. He added that Washington wants to see Israel set up an effective system to monitor piracy and punish those who violate copyright laws.

In April 2000, Washington ranked Israel in the list of next to worst offenders of copyright laws - the "priority watch" category - on grounds that Israel was not taking sufficient measures to enforce laws against copyright infringement.

Under U.S. law, Israel would face trade sanctions if its ranking goes down another notch to the category of worst violators.

Harel believes that Israel's establishment of a special police unit to fight against copyright infringement and moves in the Justice Ministry to intensify enforcement of the law will prevent Israel from being demoted further when the next list is published April 2001.

Harel said that a joint Israeli-U.S. economic committee is scheduled to convene next month in Jerusalem.

One subject on the agenda will be copyright protection in Israel and Washington is expected to make its final decision on the copyright listing on the basis of the outcome of those talks.

Harel believes the discussions will even lead to Israel being lifted out of the "priority watch" category to the less severe "watch" list. Israeli government efforts to set up appropriate monitoring and enforcement mechanisms justified moving Israel into the less severe category, he added.