Once a year, the US government engages in an odd exercise: calling out the world's "notorious markets" for copyright infringement and counterfeiting, often without any evidence that the markets in question are breaking either local or US law. Instead, the list is compiled from rightsholder complaints, and the US government then puts its imprimatur on them. And this year, the "notorious markets" list will be more prominent than ever.

The US Trade Representative has published such a list for years as part of its abominably named "Special 301" process, in which intellectual property rightsholders complain to the government about how other countries have terrible IP laws. This year, the notorious markets list will become a separate report and will focus not on laws but on private companies, and peer-to-peer file-sharing hubs now top the list.

USTR insists that "the list does not represent a finding of violation of law," but critics question what the point of it is, especially since USTR wants other countries to "step up efforts to combat piracy and counterfeiting in these and similar markets."

"This is at worst a contradiction, and at best a sign of the vague purposes of the notorious markets list," said Public Knowledge in comments recently filed with the agency. "The USTR cannot evade the role it has taken on: Creating a watchlist of foreign companies it claims violate the law is a fundamentally law enforcement activity, not a trade policy activity... [USTR] has pre-decided complex legal and factual issues. It is as though the French government had stepped in to preemptively declare that a French company was in the right in a billion-dollar lawsuit against an American company."

This isn't to say that the companies appearing on the list are exemplars of virtue; indeed, many are unbelievably dodgy if not clearly illegal. US judges have already ruled against sites like IsoHunt, for instance, while Sweden has done the same to The Pirate Bay's operators.

But for other sites, legality isn't clear. For instance, the motion picture industry filed its candidates for inclusion on the list last week, and they include the cyberlocker site RapidShare. Yes, RapidShare is awash in illicit content, but both US and German courts refused to sanction the company. Many of these services rely solely on user uploads, and in many countries, that raises complicated legal questions involving safe harbors, inducement, etc.

As Public Knowledge complains, "If the USTR is going to take sides in the matter, it should articulate its reasons. What is its basis for declaring that a [Korean] webhard service is a 'notorious' infringer, and how does this service differ from an ordinary, non-infringing web host or online file locker? What is the specific factual and legal basis for placing Baidu on a watchlist, but not Yahoo or Google?"

Still, USTR is going ahead with its list. What's likely to be on it? The MPAA filing gives us a hint. Here's what the motion picture industry sees as its highest P2P priorities:

Btjunkie.org, Sweden

Demonoid, Ukraine

IsoHunt, Canada

Kickasstorrents, Sweden

Rutracker.org, Russia

The Pirate Bay, Sweden

Next come the cyberlockers:

Ba-k.com, Mexico

Megaupload, Netherlands

RapidShare, Switzerland/Germany

Webhards, Korea

Finally, a newsgroup site (UseNext.de) makes the list, its very existence showing just how willing people are to pay for content. With 200,000 regular users and subscription plans starting at US$10 a month (i.e., more than a Netflix subscription, though Netflix is not available outside the US), MPAA estimates that the site clears around €100,000 a month.

And physical markets still matter. The MPAA calls out of host of colorful operations including the Cheriomushkinsky Market in Moscow and places in Ukraine, Thailand, Indonesia, Colombia, and China. Not all markets are in distant places, however; Toronto's "Golden Horseshoe Area" flea markets also made the list.