(Recasts and adds background)

By Doug Palmer

WASHINGTON (Reuters) - The United States andEuropean Union have reached a compromise over the use ofprestigious geographical food names like Champagne and Parma,clearing one of the last obstacles to an international pact tobattle the growing trade in counterfeit goods.

"We found the solution even on that toughest of issues," aU.S. trade official told Reuters, referring to a deal struckover the weekend in Tokyo on the proposed Anti-CounterfeitingTrade Agreement between nearly 40 countries.

The Organization for Economic Cooperation and Developmenthas estimated that global trade in counterfeit and piratedgoods rose to about $250 billion in 2007 from roughly $100billion annually in 2000.

One of the last issues resolved in talks stemmed from along-running battle between the United States and the EU overthe right to use European place names, like Champagne, Parma orRoquefort, for some of the world's most popular foods andbeverages.

American business groups worried that the EU's demand tocover "geographical indicators" in the pact could mean U.S.products as commonplace as Kraft parmesan cheese could betreated as illegal items and subject to customs seizures.

EU companies were concerned that "sui generis" protectionsfor geographical indicators outside of the trademark systemwould not have the same status under the pact as otherintellectual property.

"Essentially, the core of the compromise is ... thatparties should provide border measures without discriminatingbetween various IP rights," said the U.S. official, who spokeon condition that he not be identified.

"The EU didn't want there to be a situation created whereyou're discriminating in favor of trademarks, that trademarksget better protection than these sui generis GI regimes.

"So, they were able to take comfort from the principle thata party should not discriminate between intellectual propertyrights and that parties should avoid creating barriers tolegitimate trade," he said.

The United States and the EU have also been battling overgeographical indicators in the Doha Round of world trade talks,so the deal in Tokyo may not be the final word on the subject.

The U.S. official said the text of the proposed agreementcould be released as early as Wednesday.

The United States hopes that process will move quickly, sothat the countries that participated in the talks can make afinal decision whether to sign the pact or not, the U.S.official said.

The talks involved the United States, the EU and its 27member states, Australia, Canada, Japan, New Zealand,Singapore, South Korea and two developing countries, Moroccoand Mexico, which together have agreed to take a stand againstthe growing global trade in fake and pirated goods.

"Here you have a group of countries representing a verysubstantial part of global trade saying we are not willing tolook the other way from this challenge. We're going to confrontit head on with stronger laws, stronger cooperation andstronger enforcement actions," the U.S. official said.

China, the source of much of world's counterfeit goodsproduction, was not a party to the talks.

Digital rights and public health advocates have closelywatched the talks, which some have feared could infringe on therights of Internet users or disrupt trade in generic versionsof life-saving medicines. (Reporting by Doug Palmer; Editing by Chris Wilson)